ASTARTA HOLDING N.V. · 2020. 5. 18. · customers like Coca-Cola, Obolon and Slavutych (BBH,...

ASTARTA HOLDING N.V.

SEMI-ANNUAL REPORT OF THE BOARD OF DIRECTORS FOR THE SIX MONTHS ENDED JUNE 30, 2008

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Contents 1 Overview of the reporting period.........................................................................................3

1.1 The Group’s markets and sales of primary products ................................................3 1.1.1 Sugar sales ..............................................................................................................4 1.1.2 Crops sales..............................................................................................................5 1.1.3 Sales of farming produce ......................................................................................7

1.2 Production activities ......................................................................................................9 1.3 Financial Results..........................................................................................................13

1.3.1 Financial results: Selected Financials ................................................................13 1.3.2 Financial results: Income statement ..................................................................14 1.3.3 Financial results: Balance Sheet.........................................................................15 1.3.4 Basis for preparation of the Condensed Consolidated Interim Financial Statements ............................................................................................................................16 1.3.5 Financial Ratios ...................................................................................................16

2 Material Events during the Reporting Period ..................................................................17 2.1 Credit portfolio optimization......................................................................................17 2.2 Acquisitions ..................................................................................................................17 2.3 Changes in the shareholder structure of ASTARTA Holding N.V.........................18 2.4 Annual General Meeting of Shareholders of ASTARTA Holding N. V.................18

3 Material Events after the Reporting Date.........................................................................18 4 Shareholders’ Structure of ASTARTA Holding N.V.......................................................19 5 Board of Directors ...............................................................................................................19 6 Caution note regarding forward-looking statements .......................................................20 7 Statement of the Board of Directors ..................................................................................21

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1 Overview of the reporting period In the first half of 2008, ASTARTA was consistently implementing its development strategy. As a result of an active acquisition policy, the Group substantially augmented its land bank securing this strategic asset for expanded agricultural operations. Apart from agricultural expansion, ASTARTA also proceeded with its consolidation efforts in view of its target to be a major industry consolidator.

On June 30, 2008, the Company controlled 56 agricultural companies (almost doubled y-o-y) and one associated agricultural company, five sugar plants, as well as one canning and one combined forage factory. After the acquisition and setting up of new agricultural companies, the area of agricultural land under ASTARTA’s lease reached more than 155,000 hectares, all of which are used in the Group's operations.

Aiming at the top segment of the target markets, the Group delivered strong revenue growth and high margins, resulting from successful production and marketing operations as well as favorable market situation. Diversified clientele and re-emerging export opportunities related inter alia to the Ukraine’s accession to the WTO in May 2008 pushed the sales up.

The focus on diversified agricultural operations will be continued in the future. On June 25, 2008, ASTARTA published its Development Model for 2008 through 2012. In view of the importance of agricultural land as a strategic production asset, the Board of Directors decided to further expand the land area in operation to about 250,000 ha and to raise gross yields of primary crops produced by around 50% by 2012. It is also planned to further exploit synergy of complementary agribusinesses by developing crops and sugar production as well as cattle farming.

1.1 The Group’s markets and sales of primary products The primary products of the Group are: sugar, grains and oilseeds, cattle farming produce (milk and meat), as well as sugar by-products (molasses, beet pulp), and sugar beet. For the six months ended 30 June 2008, total Group's revenues were EUR 42,620 thousand or c. 43% more than in the first half of 2007. On the back of the aggressive growth in crop sales (93% up in the euro equivalent y-o-y), their share grew to 16% of the total. The increase in sugar sales (32% in the euro equivalent) provided for 60% in total revenues. Meat and milk sales contributed 11% to the total with 38% y-o-y growth. Figure 1. Breakdown of the Group's revenues in H1 2007 and H1 2008

H1 2008

Sugar60%

Sugar by-products7%

Cattle farming11%

Other sales and services

6%

Crops16%

H12007

Crops12%

Cattle farming12%

Other sales and services

6%

Sugar by-products6%

Sugar65%

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1.1.1 Sugar sales In terms of volumes, sugar sales increased from 51.5 thousand tons in the first half of 2007 to 77.1 thousand tons in the first half of 2008 or by c. 50%. The revenues from sugar sales were EUR 25,718 thousand compared to EUR 19,464 thousand in the H1 2007.

The table below shows quarterly sales in 2007 and the first half of 2008.

Table 1. Sugar sales in 2007 and in the first half 2008, tons

2008 2007

1 quarter 36,163 25,327

2 quarter 40,981 26,202

3 quarter - 29,821

4 quarter - 59,840

Total: - 141,190

The figure below provides the breakdown of sugar sales by clients in terms of volumes in the first half of 2008.

Figure 2. The breakdown of sugar sales by clients in H1 2008, volume

Coca-Cola24%

AVK13%

Poltavakonditer12%

Slavutych10%

Bilytsky Preserved Milk Factory

8%

Wimm-Bill-Dann2%

Other industrial5%

Traders20%

Kraft Foods Ukraine6%

In the first half of 2008, the Group continued its focus on the B2B sector. With a growing demand for soft drinks in Ukraine, two beverage producers, Coca-Cola and Slavutych (BBH, Carlsberg Group) increased their sugar orders, thus, the share of beverage producers grew c. 50% from the same period of 2007. In general, according to industry experts, Ukrainian soft drink producers boosted their production by 2.2 times in May compared to April, thus creating additional demand for sugar in Ukraine. It was a seasonal increase in sugar demand from beverage producers, enjoyed by the Group due to the expansion to this segment. The Top-4 of this sector includes key ASTARTA's customers like Coca-Cola, Obolon and Slavutych (BBH, Carlsberg Group), thus they ensured the increase in the Group's sugar sales. Sales to the three traditionally largest confectionary customers (AVK, Poltavakoditer and Kraft Foods Ukraine) were stable, with no major increase in terms of volumes, thus their combined share in the total sugar sales dropped from 43% in the first half of 2007 to 31% in the first half of 2008. The reason for such a drop is that the demand for sugar from the Ukrainian confectionaries grows in slow rates, while other sugar consuming industries develop more

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rapidly. Moreover, late spring is usually a season of lower demand for sugar from confectionaries, due to the seasonal fluctuations in the demand for their products. Thus, having clients from different sectors (beverage and confectionaries) allows the Group to balance its sugar sales and redistribute sugar among clients according to their needs. The management believes that sugars sales breakdown by customers became more balanced and Group does not crucially depend on a single customer or a sector; however all efforts are taken to further diversify the sales chains and support our reputation of high quality sugar producer and supplier. As ASTARTA was following its marketing strategy and continued to focus on large-scale industrial consumers, the share of traders diminished to a moderate 20% level. As a result of the strong B2B focus, ASTARTA managed to compete successfully by the quality of sugar and additional services rather than by price. While average market sugar prices grew c. 20% y-o-y, ASTARTA retained its c. 30% margin to the average market price. Figure 3 shows the average Ukrainian sugar prices, ASTARTA selling prices and ISCO-I sugar index for Russia in 2007-June 2008 as well as minimal recommended EU price. Figure 3. Sugar price dynamics in Ukraine, Russian Federation, the EU and by ASTARTA in January 2007 through June 2008, USD per ton, net of VAT

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ISCO-I sugar index, Russia ASTARTA Average Ukrainian EU minimum price Source: National Association of Sugar Producers Ukrtsukor, http://www.isco-i.ru, EC data, management estimates Ukrainian sugar market demonstrated moderate developments in the first half of 2008. As the market has continued its readjustment after the oversupply of 2006/2007, sugar prices were correcting to their highs of the early autumn of 2006. Ukraine substantially cut sugar output in 2007/2008 production season in comparison to record high 2006/2007. This trend is projected to continue and deficit to follow. In just six months, sugar prices in Ukraine added 20% with a further upward pressure caused by the projected limited supply of the 2008/2009 production season. For more information on the situation on sugar production, please refer to section 1.3 "Production activities".

1.1.2 Crops sales In the first half of 2008, revenues from crops sales almost doubled y-o-y to EUR 6,728 thousand, despite the fact that they were limited by the availability of grain for sale. In the middle of the reporting period, the Government of Ukraine lifted restrictions for the grain exports after the Ukraine’s accession to the WTO. Thus, the Group benefitted from the re-emerging export

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opportunities increasing its export sales to RosAgroStil. These export sales provided for 30% of the Group's total revenues from crops sales. As in previous years, the Group’s policy concerning grain sales was oriented, in terms of export supplies, toward major traders, and in the Ukrainian market – toward large processing and consuming companies, such as Kernel Trade. Figure 4. The breakdown of crop sales by clients in H1 2008, value

Kernel Trade8%

Alfred C. Toepfer International

3%

RosAgroStil30%

PromProdTorg13%

Other46%

The first half of each calendar year in Ukraine is the period when the remainder of the previous year's grain and oilseeds is sold, and the first harvest is on the way pushing the farmers to empty warehouses for the new harvest. If the latter is forecasted high as it is the case in 2008, prices go down. On the other hand, the supply is limited until the next harvest is cropped. With a slow growth in prices in the first three months of 2008, a moderate downward correction started by the end of the reporting period, however, prices remained higher than a year ago. Moreover, the liberalization of the export regime was a signal for big international traders to be more aggressive buying crops in Ukraine and selling them to booming international food markets thus pushing the domestic prices in Ukraine up, closer to international levels. Despite some correction in view of the next harvest, by the end of the reporting period average grain prices were 15-28% higher y-o-y. Prices for oilseeds were stable, with an 85-128% gain against June 2007. Figure 5. Grain prices in Ukraine in 2007 and first half 2008, USD per ton, net of VAT

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Figure 6. Oilseed prices in Ukraine in 2007 and first half 2008, USD per ton, net of VAT

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Rapeseed Sunflower seed Soybeans Source: APK-Inform Analytical Agency (www.apk-inform.com) Overall in the first half of 2008 in Ukraine corn and barley were exported most actively. Corn was exported mostly to Europe and neighboring countries, Greece, Russia and Turkey being the most active buyers (over 200 thousand tons each). Barley was mainly exported to Asian countries, Saudi Arabia adsorbing more than a half of the Ukrainian exports in total (520 thousand tons out of 1033 thousand tons of the total). Wheat prices were supported with the renewed demand from Egypt and Tunisia, while Ukraine won wheat supply bids to these countries.

1.1.3 Sales of farming produce The growth in Group’s revenues from the cattle farming in H1 2008 was associated with the favorable pricing situation in the Ukrainian market and increase in production by ASTARTA controlled agri-companies. The Group’s sales of cattle farming produce grew 38% y-o-y from EUR 3,474 thousand to EUR 4,790 thousand and provided 11% of the total revenues. Milk was mainly sold to neighboring dairy processors under yearly contracts. None of these processors is individually significant, thus the Group does not depend on either of milk buyers. Dairy prices in Ukraine are subject to seasonal fluctuations. They usually drop in summer, when the output is higher and start growing in autumn, with the price peak in winter. However, further decrease in the dairy herd in Ukraine, as well as greater demand for high quality milk for processing pushed the milk prices up to their highs in January and then slowed down the downward price correction in spring and early summer. Thus, the milk prices were on average 43% higher than a year ago. By the end of the reporting period, milk prices were 32% higher y-o-y. At the same time, milk output by all types of producers was lower than in 2007. This pricing situation was also influenced by the new quality standards introduced by the dairy processors. These new standards are to make Ukrainian dairy products compatible to those produced in the EU and to make them more competitive on new markets. According to the new standards, no milk from households (unless certified) may be accepted for processing. With households producing up to 80% of the total milk in Ukraine and supplying up to 70% of the milk for processing, dairy processors are likely to face severe shortage of raw materials. This shortage can be filled only by large-scale dairy farms producing the milk of the specified quality and in specified quantities. This situation makes ASTARTA's cattle farming a perspective business. Figure 7 shows the average Ukrainian milk prices and output in 2007- June 2008, with the aggregated upward pricing trend.

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Figure 7. Milk output and average prices in Ukraine

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1.2 Production activities In January 2008, the Board of Directors published a financial forecast that was followed by the publication of the Development model in June. In order to ensure further development, the Group's management made a decision to accelerate growth in the agricultural business, to expand arable land under control, and to improve the efficiency of agri- and sugar production. With the major consolidation efforts and focused policy of organic growth, by the end of H1 2008, the Group's agricultural companies leased over 155,000 ha of agricultural land. Not less importantly, ASTARTA has concentrated necessary resources and expertise to operate all agricultural land right after the acquisition of the lease rights, thus generating the positive cash flow and providing for better Discount Payback Period (DPBP) on investments made. In order to facilitate its expansion of agricultural operations, the Group purchased state-of-the-art-agricultural machinery from a number of EU and US producers. The on-going expansion and modernization of the agricultural machinery fleet will contribute to the efficient implementation of the ASTARTA's development strategy. In particular, the machinery purchased will be used to further implement the US agricultural technologies, which has been successfully used by ASTARTA's companies for many years. In early June, ASTARTA successfully finished the sawing campaign of the sugar beet, barley, soybeans, corn, sunflower and other crops. There were sawn (or being prepared for autumn sawing campaign) around 145 thousand of hectares, that is about 50% more than in 2007. The breakdown of land area under crops in 2008 reflects the ASTARTA's strategy to extend the profitable agribusinesses as well as to secure supply of the in-house grown sugar beet for the Group's sugar plants. Figure 8. Breakdown of Sown Areas in 2008 (%)

Sugar beet21%

Wheat20%

Barley16%

Soybeans9%

Corn8%

Other13%

Fallow6%

Sunflower7%

At the same time the sugar beet sowing campaign in Ukraine finished in June with a 40% drop in planted areas compared to the last year. In view of the pending sugar beet shortage, the trend in the number of mills shutting down has become evident this year. Active production facilities during the 2007/08 season decreased to 109 from 119 in 2006/07. In 2008/2009, as little as 65-70 sugar mills are projected to start sugar production campaign. Mills ousted from production belong to both small sugar producers and large companies not integrated into agricultural production, who have no or not enough in-house sugar beet planted.

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Figure 9. Areas under sugar beet in Ukraine in 2004-2008 and ASTARTA's share, thousand hectares

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Total area under sugar beet in Ukraine, l.s. ASTARTA's share, r.s. Source: State Statistics Committee of Ukraine (www.ukrstat.gov.ua), management estimates Contrary to the dominating trend of cutting sugar beet areas in Ukraine in 2008, ASTARTA increased its areas under sugar beet by 30% to 30,000 hectares, as the vertical integration of the business is an important competitive advantage of the Group. Such an expansion, as well as an increase in sugar beet yields will provide the Group's sugar plants with enough raw materials for efficient operations. As of the date of preparation of the report, the quality of beet roots are considered by the Company’s agronomists to be in a good condition both in western and eastern parts of Ukraine, where ASTARTA agricultural companies are operating, to secure up to 1.4 million tons output. This is expected to provide about 80% of beets used in coming 2008/2009 sugar production season thus cutting down the cost of sugar produced by the Group. In September, ASTARTA has started the new sugar production campaign. In order to make this production campaign more efficient, in the first half of 2008 the Group continued the modernization of its sugar production facilities. This should result in considerable energy savings, productivity increases and cost reductions which will significantly improve the plants’ operating performance. As a part of the modernization program, ASTARTA installed new beet cutters at Kobelaksky sugar plant, new flume water filters at Yareskivsky sugar plant, and a centrifugal machine at Globynsky sugar plant.

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Figure 10. ASTARTA sugar beets and sugar production, thousand tons

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Sugar beet processed Sugar produced Share of sugar beet grown in-house By the end of August 2008, ASTARTA's agricultural companies harvested more than 262,000 tons of early grains on the area of 59.5 thousand hectares, compared to 110,000 tons of early grains and to the total of 201,000 tons of grains and oilseeds harvested in 2007. The average yield of winter wheat was about 5.2 tons per hectare (up by 51% y-o-y), 4.0 tons per hectare for winter barley (up by 39% y-o-y) and 3.9 tons per hectare for spring barley (up by 68% y-o-y). Agricultural companies acquired by ASTARTA in 2008 harvested average yields of winter wheat at about 4.1 tons per hectare and spring barley - 3.2 tons per hectare. As for agricultural companies controlled by ASTARTA for more than 2 years, the average yield is standing for winter wheat at 5.4 tons per hectare and spring barley - 4.1 tons per hectare. The highest level of wheat yields of 6.7 tons per hectare was achieved by agricultural company "Zolota Gora" in Poltava oblast. As for winter barley - 6.1 tons per hectare by agricultural company "Ukraine-Poryk" in Vinniytsia oblast. Meanwhile the average yield in Ukraine is reported at the level of 3.2-3.5 tons per hectare for winter wheat and 2.7-2.8 tons per hectare for spring barley. Figure 11. Average yields of early grains by ASTARTA and in Ukraine in 2008, tons per hectare

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The 2008 harvesting campaign is still on the way; in September ASTARTA has started harvesting sugar beets, later in the autumn, corn, sunflower, and soybeans will be harvested. Based on the available calculations, the Group's agricultural companies plan to almost double the last year output of grains and oilseeds to up to 400,000 tons in 2008.

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1.3 Financial Results The Table below provides selected financial data as at and for the six months ended June 30 in thousands of Ukrainian hryvnia, euro and Polish zloty.

1.3.1 Financial results: Selected Financials

Table 2. Selected Financial Data in H1 2008

UAH EUR PLN SELECTED FINANCIAL DATA 2008 2007 2008 2007 2008 2007 I. Revenues 326 600 200 203 42 620 29 823 150 497 113 401 II. Profit from operations 130 474 83 035 16 993 12 284 60 005 46 709 III. Profit before tax 145 360 58 291 18 886 8 599 66 689 32 697 IV. Net profit 141 702 57 562 18 415 8 490 65 026 32 283 V. Cash flows provided by operating activities 27 740 24 456 3 572 3 644 12 613 13 856 VI. Cash flows used in investing activities (134 205) (39 972) (17 510) (5 953) (61 830) (22 636) VII. Cash flows provided by financing activities 121 836 943 15 912 140 56 188 532 VIII. Total net cash flow 15 371 (14 573) 1 974 (2 169) 6 970 (8 248) IX. Total assets 1 657 882 883 495 217 351 129 978 729 039 489 471 X. Current liabilities 627 763 303 415 82 301 44 637 276 054 168 094 XI. Non-current liabilities 160 461 113 800 21 037 16 742 70 562 63 047 XII. Share capital 1 663 1 663 250 250 839 941 XIII. Total equity 869 658 466 280 114 013 68 599 382 422 258 330 XIV. Number of shares 25 000 000 25 000 000 25 000 000 25 000 000 25 000 000 25 000 000 XV. Profit per ordinary share 5.24 2.10 0.68 0.31 2.40 1.18

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1.3.2 Financial results: Income statement In the first half of 2008, the Group’s revenues grew by 43% y-o-y up to EUR 42,620 thousand. The revenues were growing simultaneously with expanding sales of the Group's products. Sales of grains grew more rapidly (93% y-o-y) compared to sugar (32%) and cattle farming produce (38%). The revenues from cattle farming grew more actively at the beginning of the year, while in late spring and early summer downward price dynamics somewhat limited their growth. To the contrary, sales of grains spurted in spring, after export restrictions were lifted.

Due to the rapid growth in grain and dairy prices in the second half of 2007 and first half of 2008, Groups revenues were growing faster than the cost of sales (43% vs. 19%) As a result, the gross profit grew 133%. For more information on the price situation on the Ukrainian market, please refer to section 1.1 "The Group’s markets and sales of primary products".

Of the total costs of the Group’s products, the highest share is taken up by the costs of sugar and sugar by-products production, which amount to 76% (with sugar and by-products sales - 67% of total). The share of costs of cattle farming amounts to 12% (sales-11%), crops - 11% (sales - 16%). The share of costs of sugar production is traditionally high, because in the present pricing situation sugar is a less cost-effective product than agricultural produce. This however might change with increasing deficit of beet sugar in Ukraine and a potential for rising international price of raw cane sugar. The sectored gross profit margins in 1H 2008 were rather balanced within the whole business: c. 25% for sugar, its by-products production, and crops production; and 26% for farming produce. Figure 12. Breakdown of the cost of revenues in H1 2008.

Sugar and by-products

76%

Other sales1%

Cattle farimng12%

Crops11%

The active acquisitions of new agricultural companies has led to a 52% increase in the general administrative expense that will be compensated with growing sales after the newly acquired companies start generating already in 2008 a positive cash flow from operations as a part of ASTARTA Group.

The boosted sales also led to a 78% growth in selling and distribution expense resulting from i.a. increased transportation tariffs by the Ukrainian national monopolist Ukrzaliznytsia (Ukrainian railway).

Profit before tax more than doubled to EUR 18,886 thousand vs. EUR 8,599 thousand and net profit grew by 117% to EUR 18,415 thousand vs. EUR 8,490 thousand y-o-y supported i.a. by the cut in the Group's financial expense due to the focused policy of loan portfolio diversification and by a

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gain on acquisition of subsidiaries (negative goodwill) resulting from the acquisitions of undervalued agricultural companies.

In the upshot the Group fully benefited from the favorable market situation showing high gross and net margins. The gross margin constituted 25% vs.15% in H1 2007 and net margin improved from 28% to 43%. The outperformance of net margin compared to gross margin resulted i.a. from the seasonal nature of the Groups business and, namely, the revaluation of current biological assets (crops in field) that is in the full compliance with the requirements of the IFRS (for more information on revaluation of biological assets, please refer to Consolidated Financial Statements as at and for the six months ended 30 June 2008).

1.3.3 Financial results: Balance Sheet With the move of ROE to 16.2% from 12.4% and ROA to 8.5% from 6.5% y-o-y ASTARTA improved its efficiency in generating profits from its equity and net assets.

The growths of borrowings related to the active investments into land, agricultural machinery and equipment has caused the slight increase in the Net debt/Equity from 0.53 to 0.55. At the same time relatively low borrowing rates provided to ASTARTA by the first class financial institutions like EBRD, ABN AMRO and others despite the international credit crunch allowed the Group to keep its high profitability while rapidly expanding the businesses. Like in the previous two years, overall financial results in euro equivalent were growing slower than in Ukrainian hryvnias or US dollars following the trend of the EUR appreciation.

As of June 30, 2008, Group’s assets grew up to EUR 217,351 thousand - a 67% increase as compared to the same period of 2007. Out of all assets, current assets and non-current assets account for 55% and 45% respectively. The assets structure in the same period of 2007 was as follows: current assets – 67%, non-current assets – 33%.

The following factors contributed to the change of Group's assets:

1. Acquisition of new agricultural companies and agricultural machinery;

2. Increase in the value of biological assets because of expansion of areas under crops, rising market prices for agriculture produce and growing yields of ASTARTA’s agri-companies;

3. Decrease in the value of biological assets (in cattle farming) because of the seasonal decrease in milk prices and growing cost of production.

As of June 30, 2008, equity accounted for 52% of the Group’s total liabilities as against 53% as of June 30, 2007. The increase in the share of short-term loans and borrowings in the total liabilities was caused by the active restructuring of the credit portfolio taking place in the past two years. A number of loans received are repayable in less than one year, thus they were included into current loans and borrowings. To finance the new acquisition in late spring and early summer, ASTARTA received a bridge finance facility from ABN AMRO Bank repayable in three months. This loan was also included into the current loans and borrowings. Besides that, short-term loans and borrowings include UAH denominated bonds issued by Tsukrovyk Poltavschyny in August 2005 and by ASTARTA-Kyiv in June 2006. All these bonds are mature in less than one year. For more details please refer to Consolidated Financial Statements as at and for the six months ended 30 June 2008, Note 15.

The Board of Directors assesses the financial results of Group’s operations for the first half of 2008 as positive.

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1.3.4 Basis for preparation of the Condensed Consolidated Interim Financial Statements These consolidated financial statements are prepared in accordance with the International Financial Reporting Standards (IFRS) adopted by the European Union.

1.3.5 Financial Ratios In thousand of Euros and in percent

Margins 6 months

to 30 June 2008

6 months to 30 June

2007Revenues 42,620 29,823Gross Profit 10,624 4,558 Gross Profit margin % 24.9% 15.3%EBITDA 20,884 14,879EBITDA margin % 49.0% 49.9%Net profit 18,415 8,490Net profit margin % 43.2% 28.5%

Ratios 6 months

to 30 June 2008

6 months to 30 June

2007ROE 16.2% 12.4%ROA 8.5% 6.5%Current Ratio 1.45 1.95Quick Ratio 1.13 1.36EPS 0.74 0.34Market Capitalization 274,581 113,455EV 336,839 150,101Net Debt/Equity 0.55 0.53

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2 Material Events during the Reporting Period

2.1 Credit portfolio optimization Despite the low liquidity of Ukrainian banks due to the global financial crises influencing financial markets, ASTARTA enjoys the status of a publicly traded transparent company with audited financials, stable and clear businesses. This gives the Group an opportunity to negotiate the favorable loan conditions with solid international financial institutions.

• In March, 2008 Raiffeisen Bank Aval (Ukraine) extended the short term credit line for UAH 147,400 thousand (EUR 19,934 thousand) for one more year.

• Same March 2008, Export-Import Bank of the United States, Washington, D.C. (an agency of the U.S. Government) approved a credit line for Ancor Investments Limited (a subsidiary of ASTARTA Holding N.V.) by Wells Fargo HSBC Trade Bank (USA) in the amount of up to USD 10 million to purchase US-made agricultural machinery under the US Export Credit Insurance Policy. Previously Ancor Investments Limited signed contracts with the US manufacturers of agricultural machinery Amity Technology, Chief Industries Inc., Mathews Company, and CNH America.

• In April, 2008, the Board of Directors of the European Bank for Reconstruction and Development approved cooperation project with ASTARTA Holding N. V. Within this project, the EBRD shall provide up to USD 20 million long-term loan for 7 years with 18 month grace period to the Group. The project will result in energy efficiency improvements in sugar and agricultural production. On May 7, 2008, the loan facility agreement was signed.

• On May 29 2008, Bridge Facility Agreement with ABN AMRO Bank N.V. was signed to provide financing to ASTARTA Holding N.V. The Bridge Facility is guaranteed by LLC APO "Tsukrovyk Poltavshchyny" and LLC Firm "Astarta-Kyiv", both indirect subsidiaries of ASTARTA Holding N.V. The financing of USD 15 million would be applied towards the acquisition of agricultural assets and/or the financing of the working capital needs of such agricultural assets. The financing would comprise a non-secured short-term loan with the tenor of up to three months.

2.2 Acquisitions

• In February, 2008 Astarta-Kyiv signed a Protocol of intention to acquire 2 sugar plants and 6 agricultural companies with 8.2 thousand ha of agricultural land under lease in Khmelhytsky region.

• In January-June, 2008, Astarta-Kyiv acquired 74%-100% stakes in 19 agricultural companies in Vinnytsia, Zhytomyr, Khmelnytsky and Ternopil Oblasts. After these acquisitions, the Group's total area of agricultural land under lease increased by c. 20 thousand ha to c.155 thousand ha. These acquisitions were to cultivate there grains and oilseeds within the optimal crop rotation structure as well as to create a sugar beet growing area around the two sugar plants being acquired in Khmelnytsky Oblast, and to expand the existing area around the Group’s owned Zhdanivsky sugar plant in Vinnytsia Oblast.

• In April 2008, LLC Firm “Astarta-Kyiv” established a new 100% owned subsidiary SC “Tsukrovyk Podillia”. Astarta-Kyiv contributed UAH 50 thousand (EUR 7 thousand) into charter capital of this entity. This subsidiary was established to control sugar production facilities in Khmelnytsky Oblast.

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• In April 2008, the Group increased its control over OJSC “Agricultural Company “Agrocomplex” by means of acquiring additional participation in the charter capital. The Group owns 81.24% subsequent to the additional purchase.

2.3 Changes in the shareholder structure of ASTARTA Holding N.V

• In May 2008, ING Parasol Specjalistyczny Fundusz Inwestycyjny Otwarty disposed shares of Astarta Holding N.V. that resulted in declining the threshold of 5% of voting rights on the general shareholders meeting of Astarta Holding N.V. As at 20 May 2008 ING Parasol Specjalistyczny Fundusz Inwestycyjny Otwarty possessed alone jointly 1,238,061 shares of Astarta Holding N.V., what gives 4.95% of registered capital of the Company.

• In June 2008, ING Fundusz Inwestycyjny Zamknięty Stabilnego Wzrostu, ING Fundusz Inwestycyjny Zarnknięty Akcji and ING Parasol Specjalisryczny Fundusz Inwestycyjny Otwarty jointly disposed shares of Astarta Holding N.V. that resulted in declining the threshold of 5 % of voting rights on the general shareholders meeting of Astarta Holding N.V. As of June 5 2008, the shares possessed by all the investment funds mentioned above treated jointly resulted in 1,237,894 of voting rights on the general shareholders meeting, what gives 4.95 % of all voting rights on the General Shareholders Meeting of Astarta Holding N.V.

2.4 Annual General Meeting of Shareholders of ASTARTA Holding N. V.

• On June 27, 2008, the Annual General Meeting of the Company's Shareholders was held. The AGM adopted a set of resolutions concerning the Company's corporate governance system. For more details, please refer http://www.astartakiev.com/?id=2214.

3 Material Events after the Reporting Date

• On July 12, 2008, SC "Tsukrovyk Podillia" (an indirect subsidiary of ASTARTA Holding N. V.) acquired the integral property complex of the Narkevychi sugar plant. The property complex was endowed to the subsidiary's subdivision Narkevychi sugar plant in Khmelnitsky Oblast. At present, the respective documents are filed for registration with the state authorities.

Expansion of ASTARTA’s business in the Khmelnitsky Oblast is an element of the Group's strategy aimed at the geographical diversification and dynamic growth, declared during the IPO in 2006. In accordance with the policy of vertical integration pursued by ASTARTA, and alongside with the acquisition of the property complex of Narkevychi sugar plant, the Group creates a network of the agricultural companies controlled by ASTARTA in this region. These companies will be focused on production of grains and oilseeds, as well as growing of sugar beet as a raw material for the Group’s sugar plants. Thus, the agribusiness of the Group will benefit from favorable climatic and environmental conditions in this region, in particular optimum norm of rainfalls (about 625 mm/y) and high-quality soils, including black earth.

Expansion of the Group's business in the western regions of Ukraine also corresponds with its marketing strategy aimed to strengthen further its positions in the B2B sector and to meet the needs of large industrial clients nationwide. As a part of this strategy, ASTARTA has recently signed supply contracts with a subdivision of Nestle that controls production facilities in Western Ukraine.

• On July 17, 2008, the Group increased its control over LLC “Dobrobut” (Novo-Sanzharskiy region) by means of acquiring additional participation in the charter capital. The Group owns 99.88% subsequent to the additional purchase.

• On September 17, 2008, LLC Firm "Astarta-Kyiv" (a subsidiary of ASTARTA Holding N.V.) and Foreign Enterprise "Сoca-Cola Beverages Ukraine Limited" signed a contract for sugar sale

19

for 2009 through 2011. Under the terms of the contract LLC Firm "Astarta-Kyiv" supplies FE "Сoca-Cola Beverages Ukraine Limited" with sugar according to a monthly schedule. The contract contains standard provisions typical for contracts of such kind. The contract is considered significant by the Company because value of the contract exceeds 10% of the Group's sales in the last four financial quarters.

4 Shareholders’ Structure of ASTARTA Holding N.V. According to the information available to the Company, as of June 30, 2008, the following shareholders provided information concerning direct or indirect (through subsidiaries) ownership of at least 5% of total votes at the General Shareholders Meeting of ASTARTA Holding N.V. Table 4. Shareholders’ Structure of ASTARTA Holding N.V. as of June 30, 2008

Shareholder Number of shares

Percentage of the owned share capital

Number of votes at the

General Meeting

Percentage of the votes at the

General Meeting

Viktor Ivanchyk through his wholly ownedCypriot company Albacon Ventures Ltd. 10,000,000 40.00 10,000,000 40.00

Valery Korotkov through his wholly ownedCypriot company Aluxes Holding Ltd. 10,000,000 40.00 10,000,000 40.00

Other shareholders 5,000,000 20.0 5,000,000 20.0 TOTAL 25,000,000 100.00 25,000,000 100.00

5 Board of Directors The Board of Directors of ASTARTA Holding N.V. consists of five members: Viktor Ivanchyk (Chief Executive Officer), Petro Rybin (Chief Operating and Financial Officer), Marc van Campen (Chief Corporate Officer), Valeriy Korotkov (Chairman of the Board, Non-Executive Director), Wladyslaw Bartoszewski (Vice Chairman of the Board, Non-Executive Director, Chairman of the Audit Committee). Viktor Ivanchyk and Valery Korotkov as owners of the companies in Cyprus, hold indirectly 80% of the votes at the General Shareholders Meeting of the Company, 40% each. Besides, each Viktor Ivanchyk and Valery Korotkov own directly 0.01% of the share capital of Astarta-Kyiv. The rest of the directors do not own, whether directly or indirectly, any shares or other securities giving rights to acquire these shares neither from the date of the Company’s registration up to the date of this statement, nor after this period.

20

6 Caution note regarding forward-looking statements Certain statements contained in this report may constitute forecasts and estimates. These statements involve a number of risks, uncertainties and other factors that could cause actual results to differ materially from the anticipated results, expressed or implied by these forward-looking statements. Board of Directors of ASTARTA Holding N.V. V. Ivanchyk ___(signed)____ P. Rybin ___(signed)____ M.M.L.J. van Campen ___(signed)____ V. Korotkov ___(signed)____ W.T. Bartoszewski ___(signed)____ 17 September 2008, Amsterdam, The Netherlands

21

7 Statement of the Board of Directors

REPRESENTATION

of the Board of Directors

of ASTARTA Holding N.V.

on compliance of the condensed consolidated interim financial statements

The Board of Directors of ASTARTA Holding N.V. hereby represent that to the best of their knowledge the condensed consolidated interim financial statements of ASTARTA Holding N.V. for the period ended 30 June 2008 and the comparable information are prepared in accordance with the applicable accounting standards and that they give a true, fair and clear view of the assets, financial standing and financial results of ASTARTA Holding N.V., and that the report of the Board of Directors on the operations of ASTARTA Holding N.V. for the first half 2008 gives a true view of the developments, achievements and situation of the Company, including a description of the key risks and threats. Board of Directors of ASTARTA Holding N.V. V. Ivanchyk ___(signed)____ P. Rybin ___(signed)____ M.M.L.J. van Campen ___(signed)____ V. Korotkov ___(signed)____ W.T. Bartoszewski ___(signed)____ 17 September 2008, Amsterdam, The Netherlands

22

REPRESENTATION

of the Board of Directors

of ASTARTA Holding N.V.

on appointment of the entity qualified to review financial statements

The Board of Directors of ASTARTA Holding N.V. hereby represents that entity which performed the review of the consolidated financial statements of ASTARTA Holding N.V. for the period ended 30 June 2008 has been appointed in accordance with the applicable laws and that this entity and the accountants performing the review met the conditions necessary to issue an impartial and independent report on the review in accordance with the applicable provisions of law. Board of Directors of ASTARTA Holding N.V. V. Ivanchyk ___(signed)____ P. Rybin ___(signed)____ M.M.L.J. van Campen ___(signed)____ V. Korotkov ___(signed)____ W.T. Bartoszewski ___(signed)____ 17 September 2008, Amsterdam, The Netherlands

ASTARTA HOLDING N.V.

INTERIM CONDENSED СONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE SIX MONTHS ENDED 30 JUNE 2008

These interim condensed consolidated financial

statements contain 78 pages

Astarta Holding N.V. Interim condensed consolidated financial statements as at and for the six months ended 30 June 2008

CONTENTS

INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AS AT AND FOR THE SIX MONTHS ENDED 30 JUNE 2008

INTERIM CONDENSED CONSOLIDATED BALANCE SHEET 2

INTERIM CONDENSED CONSOLIDATED INCOME STATEMENT 6

INTERIM CONDENSED CONSOLIDATED CASH FLOW STATEMENT 10

INTERIM CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY 14

NOTES TO THE INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 18

INDEPENDENT ACCOUNTANTS’ REPORT ON REVIEW OF INTERIM CONDENSED CONSOLIDATED FINANCIAL INFORMATION

Astarta Holding N.V.Interim condensed consolidated financial statements as at and for the six months ended 30 June 2008

2

INTERIM CONDENSED CONSOLIDATED BALANCE SHEET AS AT

(in thousands of Ukrainian hryvnias) 30 June 2008 31 December

2007 30 June 2007

(unaudited) (audited) (unaudited)

(restated)

Assets

Non-current assets

Property, plant and equipment 6 694,488 578,119 251,233

Intangible assets 4,009 992 705

Biological assets 7 43,564 47,331 33,817

Financial instruments held-to-maturity 8 2,071 4,987 4,151

Investments 9 2,597 1,795 172

Other long-term assets 566 431 920

Deferred tax assets 477 905 1,293

747,772 634,560 292,291

Current assets

Inventories 10 198,802 384,737 177,125


Trade accounts receivable 11 83,860 60,028 101,875

Other accounts receivable and prepayments 12 100,601 75,509 66,874

Promissory notes available-for-sale 2,689 5,632 3,127

Cash and cash equivalents 23,297 7,926 5,321

910,110 646,724 591,204

Total assets 1,657,882 1,281,284 883,495

The interim condensed consolidated balance sheet is to be read in conjunction with the notes to and forming part of the interim consolidated financial statements set out on pages 16 to 78.


3

INTERIM CONDENSED CONSOLIDATED BALANCE SHEET AS AT, CONTINUED

(in thousands of Ukrainian hryvnias) 30 June 2008 31 December

2007 30 June 2007


(restated)

Equity and liabilities

Equity

Share capital 13 1,663 1,663 1,663

Additional paid-in capital 371,322 371,733 374,264

Retained earnings 322,477 192,042 95,597

Revaluation surplus 168,317 168,317 -

Currency translation adjustment (3,414) (6,199) (6,284)

Total equity attributable to equity holders of parent company 860,365 727,556 465,240

Minority interests relating to open joint stock companies 14 9,293 7,520 1,040

Total equity 869,658 735,076 466,280

Non-current liabilities

Loans and borrowings 15 63,724 41,897 82,296 Minority interests relating to limited liability companies 14 39,581 26,457 18,982

Other long-term liabilities 7,697 4,324 6,143

Deferred tax liabilities 49,459 45,298 6,379

160,461 117,976 113,800

Current liabilities

Short-term loans and borrowings 15 395,726 307,648 161,770 Current portion of long-term loans and borrowings 15 38,732 30,930 10,350

Trade accounts payable 114,637 40,476 86,335

Promissory notes issued 5,001 - -

Other liabilities and accounts payable 16 73,667 49,178 44,960

627,763 428,232 303,415

Total equity and liabilities 1,657,882 1,281,284 883,495

The interim condensed consolidated balance sheet is to be read in conjunction with the notes to and forming part of the interim condensed consolidated financial statements set out on pages 16 to 78.


4

INTERIM CONDENSED CONSOLIDATED BALANCE SHEET AS AT

(in thousands of Euros) 30 June 2008 31 December

2007 30 June 2007


(restated)

Assets

Non-current assets

Property, plant and equipment 6 91,047 77,919 36,961

Intangible assets 526 134 104


Financial instruments held-to-maturity 8 272 672 611

Investments 9 341 242 25

Other long-term assets 74 58 135

Deferred tax assets 63 122 190

98,035 85,527 43,001

Current assets

Inventories 10 26,064 51,855 26,057


Trade accounts receivable 11 10,994 8,091 14,988

Other accounts receivable and prepayments 12 13,189 10,176 9,839

Promissory notes available-for-sale 353 759 460

Cash and cash equivalents 3,054 1,068 783

119,316 87,165 86,977

Total assets 217,351 172,692 129,978



5

INTERIM CONDENSED CONSOLIDATED BALANCE SHEET AS AT, CONTINUED

(in thousands of Euros) 30 June 2008 31 December

2007 30 June 2007


(restated)

Equity and liabilities

Equity

Share capital 13 250 250 250

Additional paid-in capital 55,744 55,797 56,175

Retained earnings 44,984 28,038 14,305

Revaluation surplus 22,685 22,685 -

Currency translation adjustment (10,868) (8,710) (2,284)

Total equity attributable to equity holders of parent company 112,795 98,060 68,446

Minority interests relating to open joint stock companies 14 1,218 1,014 153

Total equity 114,013 99,074 68,599

Non-current liabilities

Loans and borrowings 15 8,355 5,647 12,107 Minority interests relating to limited liability companies 14 5,189 3,566 2,793

Other long-term liabilities 1,009 583 904

Deferred tax liabilities 6,484 6,105 938

21,037 15,901 16,742

Current liabilities

Short-term loans and borrowings 15 51,880 41,465 23,799 Current portion of long-term loans and borrowings 15 5,077 4,169 1,523

Trade accounts payable 15,029 5,455 12,701

Promissory notes issued 656 - -

Other liabilities and accounts payable 16 9,659 6,628 6,614

82,301 57,717 44,637

Total equity and liabilities 217,351 172,692 129,978



6

INTERIM CONDENSED CONSOLIDATED INCOME STATEMENT FOR THE SIX MONTHS ENDED 30 JUNE

(in thousands of Ukrainian hryvnias) 2008 2007 (unaudited) (unaudited) (restated) Revenues 18 326,600 200,203 Cost of revenues 19 (230,007) (169,159) Loss arising from remeasurement of agricultural produce to fair value (15,186) (451)

Gross profit 81,407 30,593

Changes in fair value of biological assets 24 89,807 75,276 Other operating income 20 21,736 12,192 General and administrative expense 21 (37,171) (21,403) Selling and distribution expense 22 (17,837) (8,777) Other operating expense 23 (7,468) (4,846)

Profit from operations 130,474 83,035

Net financial expense 25 (4,686) (26,284) Other income 26 655 836 Gain on acquisition of subsidiaries 5 18,917 704

Profit before tax 145,360 58,291 Income tax expense 27 (3,658) (729)

Net profit 141,702 57,562

Net profit attributable to: Minority interests of limited liability companies subsidiaries 14 9,572 4,906 Minority interests of open joint stock companies subsidiaries 14 1,235 96 Equity holders of parent company 130,895 52,560

Net profit 141,702 57,562

Weighted average basic and diluted shares outstanding (in thousands of shares) 25,000 25,000

Basic and diluted earnings per share attributable to shareholders of the parent (in Ukrainian hryvnias) 5.24 2.10

The interim condensed consolidated income statement is to be read in conjunction with the notes to and forming part of the interim condensed consolidated financial statements set out on pages 16 to 78.


7

INTERIM CONDENSED CONSOLIDATED INCOME STATEMENT FOR THE SIX MONTHS ENDED 30 JUNE

(in thousands of Euros) 2008 2007 (unaudited) (unaudited) (restated) Revenues 18 42,620 29,823 Cost of revenues 19 (29,997) (25,198) Loss arising from remeasurement of agricultural produce to fair value (1,999) (67)


Changes in fair value of biological assets 24 11,695 11,129 Other operating income 20 2,827 1,817 General and administrative expense 21 (4,848) (3,188) Selling and distribution expense 22 (2,330) (1,309) Other operating expense 23 (975) (723)


Net financial expense 25 (636) (3,915) Other income 26 86 125 Gain on acquisition of subsidiaries 5 2,443 105

Profit before tax 18,886 8,599 Income tax expense 27 (471) (109)

Net profit 18,415 8,490

Net profit attributable to: Minority interests of limited liability companies subsidiaries 14 1,245 731 Minority interests of open joint stock companies subsidiaries 14 165 14 Equity holders of parent company 17,005 7,745

Net profit 18,415 8,490


Basic and diluted earnings per share attributable to shareholders of the parent (in Euros) 0.68 0.31

The interim condensed consolidated income statement is to be read in conjunction with the notes to and forming part of the interim condensed consolidated statements set out on pages 16 to 78.


8

CONDENSED CONSOLIDATED INCOME STATEMENT FOR THE THREE MONTHS ENDED 30 JUNE

(in thousands of Ukrainian hryvnias) 2008 2007

(unaudited) (unaudited) (restated) Revenues 175,941 104,316 Cost of revenues (129,788) (91,027) Loss arising from remeasurement of agricultural produce to fair value (2,952) 4,292


Changes in fair value of biological assets 56,169 49,521 Other operating income 14,530 8,255 General and administrative expense (21,481) (10,760) Selling and distribution expense (9,006) (2,849) Other operating expense (3,678) (1,672)


Net financial income (expense) 5,210 (21,039) Other income 520 836 Gain on acquisition of subsidiaries 18,199 -

Profit before tax 103,664 39,873 Income tax expense (4,013) (3,313)

Net profit 99,651 36,560

Net profit attributable to: Minority interests of limited liability companies subsidiaries 5,702 4,297 Minority interests of open joint stock companies subsidiaries 225 96 Equity holders of parent company 93,724 32,167

Net profit 99,651 36,560


Basic and diluted earnings per share attributable to shareholders of the parent (in Ukrainian hryvnias) 3.75 1.29


9

CONDENSED CONSOLIDATED INCOME STATEMENT FOR THE THREE MONTHS ENDED 30 JUNE

(in thousands of Euros) 2008 2007 (unaudited) (unaudited) (restated) Revenues 22,697 15,334 Cost of revenues (16,745) (13,392) Loss arising from remeasurement of agricultural produce to fair value (381) 648


Changes in fair value of biological assets 7,246 7,306 Other operating income 1,874 769 General and administrative expense (2,771) (1,577) Selling and distribution expense (1,162) (413) Other operating expense (473) 211


Net financial income (expense) 672 (3,122) Other income 67 125 Gain on acquisition of subsidiaries 2,348 -

Profit before tax 13,372 5,889 Income tax expense (518) (499)

Net profit 12,854 5,390

Net profit attributable to: Minority interests of limited liability companies subsidiaries 734 639 Minority interests of open joint stock companies subsidiaries 31 14 Equity holders of parent company 12,089 4,737

Net profit 12,854 5,390


Basic and diluted earnings per share attributable to shareholders of the parent (in Euros) 0.48 0.19


10

INTERIM CONDENSED CONSOLIDATED CASH FLOW STATEMENT FOR THE SIX MONTHS ENDED 30 JUNE

(in thousands of Ukrainian hryvnias) 2008 2007 (unaudited) (unaudited)

(restated) Operating activities Profit before tax 145,360 58,291 Adjustments for: Depreciation and amortization 29,789 17,418 Impairment provision on trade and other accounts receivable 22 1,548 1,035 Gain on acquisition of subsidiaries 5 (18,917) (704) Gain on sales of property, plant and equipment (155) (306) Write down of inventories 146 776 Interest expense 25 22,757 19,037 Gain from changes in fair value of biological assets 24 (89,807) (75,276) Decrease in inventories 215,671 127,967 (Increase) decrease in trade and other receivables (40,607) 7,037 Increase in biological assets due to other changes (279,071) (121,487) Increase in trade and other payables 59,222 8,907 Income taxes paid (385) (459) Interest paid (17,811) (17,780)

Cash flows provided by operating activities 27,740 24,456

Investing activities Purchase of property, plant and equipment, intangible assets and other non-current assets (135,046) (42,751)

Proceeds from sales of property, plant and equipment 3,803 1,517 Purchase of investments held-to-maturity - (100) Sale of promissory notes available-for-sale 2,943 879 Interest received 1,309 390 Proceeds from sales of bonds receivable from related party 4,287 1,500 Acquisition of subsidiaries net of cash acquired 5 (11,501) (1,407)

Cash flows used in investing activities (134,205) (39,972)

The interim condensed consolidated cash flow statement is to be read in conjunction with the notes to and forming part of the interim condensed consolidated statements set out on pages 16 to 78.


11

INTERIM CONDENSED CONSOLIDATED CASH FLOW STATEMENT FOR THE SIX MONTHS ENDED 30 JUNE, CONTINUED

(in thousands of Ukrainian hryvnias) 2008 2007 (unaudited) (unaudited) (restated) Financing activities Proceeds from loans and borrowings 309,279 46,624 Principal payments on loans and borrowings (192,855) (42,930) Increase (decrease) in promissory notes issued 5,001 (2,751) Acquisitions from minority shareholders 14 411 -

Cash flows provided by financing activities 121,836 943

Net increase (decrease) in cash and cash equivalents 15,371 (14,573) Cash and cash equivalents as at 1 January 7,926 19,894

Cash and cash equivalents as at 30 June 23,297 5,321



12

INTERIM CONDENSED CONSOLIDATED CASH FLOW STATEMENT FOR THE SIX MONTHS ENDED 30 JUNE

(in thousands of Euros) 2008 2007 (unaudited) (unaudited)

(restated) Operating activities Profit before tax 18,886 8,599 Adjustments for: Depreciation and amortization 3,891 2,595 Impairment provision on trade and other accounts receivable 22 202 154 Gain on acquisition of subsidiaries 5 (2,443) (105) Gain on sales of property, plant and equipment (20) (46) Write down of inventories 19 116 Interest expense 25 2,992 2,836 Gain from changes in fair value of biological assets 24 (11,695) (11,129) Decrease in inventories 28,168 19,062 (Increase) decrease in trade and other receivables (5,304) 1,048 Increase in biological assets due to other changes (36,483) (18,096) Increase in trade and other payables 7,735 1,327 Income taxes paid (50) (68) Interest paid (2,326) (2,649)

Cash flows provided by operating activities 3,572 3,644

Investing activities Purchase of property, plant and equipment, intangible assets and other non-current assets (17,638) (6,366)

Proceeds from sales of property, plant and equipment 497 226 Purchase of investments held-to-maturity - (15) Sale of promissory notes available-for-sale 384 131 Interest received 171 58 Proceeds from sales of bonds receivable from related party 560 223 Acquisition of subsidiaries net of cash acquired 5 (1,484) (210)

Cash flows used in investing activities (17,510) (5,953)



13

INTERIM CONDENSED CONSOLIDATED CASH FLOW STATEMENT FOR THE SIX MONTHS ENDED 30 JUNE, CONTINUED

(in thousands of Euros) 2008 2007 (unaudited) (unaudited) (restated) Financing activities Proceeds from loans and borrowings 40,394 6,945 Principal payments on loans and borrowings (25,188) (6,395) Increase (decrease) in promissory notes issued 653 (410) Acquisitions from minority shareholders 14 53 -

Cash flows provided by financing activities 15,912 140

Net increase (decrease) in cash and cash equivalents 1,974 (2,169) Cash and cash equivalents as at 1 January 1,068 2,991 Currency translation difference 12 (39)

Cash and cash equivalents as at 30 June 3,054 783



14

INTERIM CONDENSED СONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE SIX MONTHS ENDED 30 JUNE 2008

Attributable to equity holders of parent company

(in thousands of Ukrainian hryvnias)

Share capital

Additional paid-in capital

Retained earnings

Revaluation surplus

Currency translation adjustment

Total Minority interests

Total equity

(unaudited) (unaudited) (unaudited) (unaudited) (unaudited) (unaudited) (unaudited) (unaudited) As at 1 January 2008 1,663 371,733 192,042 168,317 (6,199) 727,556 7,520 735,076

Net profit - - 130,895 - - 130,895 - 130,895 Net profit attributable to minority shareholders of open joint stock companies - - - - - - 1,235 1,235

Currency translation differences - - - - 2,785 2,785 - 2,785

Total recognized income and expenses - - 130,895 - 2,785 133,680 1,235 134,915

Acquisitions of entities under common control (note 5) - - (460) - - (460) - (460) Changes in minority interests - (411) - - - (411) 538 127

As at 30 June 2008 1,663 371,322 322,477 168,317 (3,414) 860,365 9,293 869,658

The interim condensed consolidated statement of changes in equity is to be read in conjunction with the notes to and forming part of the interim condensed consolidated financial statements set out on pages 16 to 78.


15



(in thousands of Euros)

Share capital


Retained earnings

Revaluation surplus



Total equity

(unaudited) (unaudited) (unaudited) (unaudited) (unaudited) (unaudited) (unaudited) (unaudited) As at 1 January 2008 250 55,797 28,038 22,685 (8,710) 98,060 1,014 99,074

Net profit - - 17,005 - - 17,005 - 17,005 Net profit attributable to minority shareholders of open joint stock companies - - - - - - 165 165

Currency translation differences - - - - (2,158) (2,158) (30) (2,188)

Total recognized income and expenses - - 17,005 - (2,158) 14,847 135 14,982

Acquisitions of entities under common control (note 5) - - (59) - - (59) - (59) Changes in minority interest - (53) - - - (53) 69 16

As at 30 June 2008 250 55,744 44,984 22,685 (10,868) 112,795 1,218 114,013



16




Share capital


Retained earnings

Fair value reserve



Total equity

(unaudited) (unaudited) (unaudited) (unaudited) (unaudited) (unaudited) (unaudited) (unaudited) As at 1 January 2007, restated 1,663 371,599 40,969 (233) (2,979) 411,019 - 411,019

Net profit - - 38,263 - - 38,263 - 38,263 Change in fair value of promissory notes available-for-sale - - - 233 - 233 - 233 Remeasurement of loans from related parties to market terms - 2,665 - - - 2,665 - 2,665 Net profit attributable to minority shareholders of open joint stock companies - - - - - - 96 96

Currency translation differences - - - - (3,305) (3,305) - (3,305)

Total recognized income and expenses - 2,665 38,263 233 (3,305) 37,856 96 37,952

Acquisitions of entities under common control (note 5) - - 2,067 - - 2,067 944 3,011

As at 30 June 2007, as originally reported 1,663 374,264 81,299 - (6,284) 450,942 1,040 451,982 Restatement of the fair value of dairy cattle (note 4) - - 14,297 - - 14,297 - 14,297

As at 30 June 2007, restated 1,663 374,264 95,596 - (6,284) 465,239 1,040 466,279



17




Share capital


Retained earnings

Fair value reserve



Total equity

(unaudited) (unaudited) (unaudited) (unaudited) (unaudited) (unaudited) (unaudited) (unaudited) As at 1 January 2007, restated 250 55,778 6,254 (35) (447) 61,800 - 61,800

Net profit - - 5,700 - - 5,700 - 5,700 Change in fair value of promissory notes available-for-sale - - - 35 - 35 - 35 Remeasurement of loans from related parties to market terms - 397 - - - 397 - 397 Net profit attributable to minority shareholders of open joint stock companies - - - - - - 14 14

Currency translation differences - - - - (1,837) (1,837) (2) (1,839)

Total recognized income and expenses - 397 5,700 35 (1,837) 4,295 12 4,307

Acquisitions of entities under common control (note 5) - - 306 - - 306 141 447

As at 30 June 2007, as originally reported 250 56,175 12,260 - (2,284) 66,401 153 66,554 Restatement of the fair value of dairy cattle (note 4) - - 2,045 - - 2,045 - 2,045

As at 30 June 2007, restated 250 56,175 14,305 - (2,284) 68,446 153 68,599



18

1 BACKGROUND

(a) Organization and operations These interim condensed consolidated financial statements are prepared by ASTARTA Holding N.V. (the Company), a Dutch public company incorporated in Amsterdam, the Netherlands, on 9 June 2006 under Dutch law.

The Company’s legal address is Koningslaan 17, 1075 AA, Amsterdam, the Netherlands.

On 4 July 2006 the shareholders of the Company contributed their shares in the Cyprus based company Ancor Investments Ltd to ASTARTA Holding N.V. After the contribution, ASTARTA Holding N.V. owns 100% of share capital of Ancor Investment Ltd.

Ancor Investments Ltd owns 99.98% of the capital of LLC Firm “Astarta-Kyiv” (Astarta-Kyiv) registered in Ukraine, which in turn controls a number of subsidiaries in Ukraine.

On 16 August 2006 the Company’s shares were admitted for trading on the Warsaw Stock Exchange. The first quotation of the shares on the Warsaw Stock Exchange took place on 17 August 2006.

These interim condensed consolidated financial statements include the Company and its subsidiaries (the Group).

Historically the principal operation of the Group was sugar production. The Group is transforming into a diverse agricultural business by developing its dairy cattle operation and expanding its crop growing activities. The croplands and sugar plants are mainly located in the Poltava, Vinnytsia and Khmelnitska oblasts (administrative divisions) of Ukraine. The business is vertically-integrated because sugar is produced primarily using own-grown sugar beet. The Group is also active in growing and selling various grain crops.

Two 40.00% shareholders ultimately control the Group.

(b) Ukrainian business environment

Ukraine is experiencing political and economic change that has affected, and may continue to affect, the activities of enterprises operating in this environment. Consequently, operations in Ukraine involve risks that do not typically exist in the EU markets. These interim condensed consolidated financial statements reflect management’s current assessment of the possible impact of the Ukrainian business environment on the operations and the financial position of the Group. The future business environment may differ from management’s assessment. The impact of such differences on the operations and the financial position may be significant.


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2 BASIS OF PREPARATION

(a) Statement of compliance

These interim condensed consolidated financial statements are prepared in accordance with the International Financial Reporting Standards (IFRS) adopted by the European Union.

(b) Basis of consolidation Subsidiaries are those enterprises controlled separately by an entity. Control exists when the Company has the power, directly or indirectly, to govern the financial and operating policies of an enterprise to obtain benefits from it activities. The financial statements of subsidiaries are included in the consolidated financial statements of the Company from the date that control effectively commences until the date that control effectively ceases.

Associates are those enterprises in which the Company has significant influence, but not control, over its financial and operating policies. The interim condensed consolidated financial statements include the Company’s share of the total recognized gains and losses of an associate on an entity accounted basis, from the date that significant influence effectively commences until the date that significant influence effectively ceases. When the Company’s share of losses exceeds the carrying amount of the associate, the carrying amount is reduced to nil and recognition of further losses is discontinued except to the extent that the Company has incurred obligations in respect of the associate.

These interim condensed consolidated financial statements include the Company and its subsidiaries. The operating subsidiaries in Ukraine are owned by LLC Firm Astarta-Kyiv, a Ukrainian limited liability company.

During the six months ended 30 June 2008 the Company increased its ownership in OJSC “Agricultural Company “Agrocomplex” to 81.24% and acquired 18 companies.

During the three months ended 30 June 2008 the subsidiary companies SC "Tsukrovyk Podillya", SC "Zoloty Kolos Podillya"and LLC “Agricultural Company “Sidorenkove" were established.

(c) Acquisition and disposal of minority interests

Any difference between the consideration paid to acquire minority interests or any difference between the consideration received upon disposal of minority interests and the carrying amount of that portion of the Group’s interest in the subsidiary, is recognized as equity increases (or decreases) in the parent shareholder’s interest, so long as the parent controls the subsidiary. The presentation of minority interests within equity supports the recognition of increases and decreases in ownership interests in subsidiaries without a change in control as equity transactions in the interim condensed consolidated financial statements. Accordingly, any premiums or discounts on subsequent purchases of equity instruments from (or sales of equity instruments to) minority interests is recognized directly in the parent shareholders’ equity.

(d) Transactions eliminated on consolidation Intercompany balances and transactions, and any unrealized gains arising from intercompany transactions, are eliminated in preparing the interim condensed consolidated financial statements. Unrealized gains arising from transactions with the equity accounted investments are eliminated to the extent of the Group’s interest in the enterprise. Unrealized gains resulting from transactions with the equity accounted investments are eliminated against the investment in the associate. Unrealized losses are eliminated in the same way as unrealized gains except that they are only eliminated to the extent that there is no evidence of impairment.

(e) Common control transactions

The acquisition of controlling interests in entities that are under the control of the same controlling equity holders as the Group are accounted for on the date of acquisition. The assets and liabilities acquired are recognized at their previous book values as recorded in the individual IFRS financial statements of the


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acquired enterprise. The components of equity of the acquired enterprises are added to the same components within Group equity. Any cash paid for the acquisition is charged to equity.

The disposal of subsidiaries to entities that are under the control of the same controlling equity holders as the Group are accounted for by recognizing the difference between the consideration received and the carrying amount of the net assets of the subsidiary, including minority interests and attributable goodwill, in equity.

(f) Basis of accounting

The interim condensed consolidated financial statements are prepared using the fair value basis for property, biological assets, agricultural produce and promissory notes available-for-sale. Biological assets are stated at their fair value less estimated point-of-sale costs, whereas agricultural produce is stated at its fair value less estimated point-of-sale costs at the point of harvest. Promissory notes available-for-sale are stated at fair value. Beginning 31 December 2007, property is carried at fair value as determined by independent appraisal.

(g) Minority interest participants

Substantially all of the Company's subsidiaries are limited liability companies. Under Ukrainian law, a participant in a limited liability company may unilaterally withdraw his share in a company. In such case, the company is obliged to pay the withdrawing participant’s share of the net assets of the company determined in accordance with Ukrainian National Accounting Standards not later than 12 months from the date of the withdrawal. Consequently, minority interests in limited liability companies that are subsidiaries are recognized as a non-current liability.

Since a participant in an open joint stock company may not withdraw his share in a company, the corresponding minority interests are recognized in equity.

(h) Functional and presentation currency

The operating subsidiaries and the equity accounted investments in Ukraine have the Ukrainian hryvnia (UAH) as their functional currency. The financial data of the companies registered in Ukraine are converted from UAH to EUR and are rounded to the nearest thousand.

Management chose to present the interim condensed consolidated financial statements in two currencies, Euros and UAH.

For the purposes of presenting interim condensed consolidated financial statements, assets and liabilities are translated for companies operating in Ukraine from UAH to EUR (Euro) using the closing rates at each balance sheet date, and income and expenses are translated at the average rates for each respective period. The rates are obtained from the National Bank of Ukraine. The resulting translation differences are shown in equity.

(i) Critical accounting estimates and judgments in applying accounting policies

The preparation of the interim condensed consolidated financial statements in conformity with IFRS requires management to make judgments, estimates and assumptions that affect the application of policies and the reported amounts of assets, liabilities, income and expense. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis of making the judgments about carrying values of assets and liabilities that are not readily apparent from other sources. Although these estimates are based on management’s best knowledge of current events and actions, actual results ultimately may differ from these estimates. The most significant estimates and assumptions are as follows:

Impairment of trade accounts receivable

Management estimates impairment by assessing the likelihood of the collection of trade accounts receivable based on an analysis of individual accounts. Factors taken into consideration when assessing individual accounts include an ageing analysis of trade accounts receivable in comparison with the credit terms provided to customers, the financial position and collection history with the customer.


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Fair value of property

As at 31 December 2007 management adopted the revaluation model of accounting for property (buildings). Under this method, property is carried at fair value less any subsequent accumulated depreciation and impairment losses. As buildings in the sugar production, agricultural and cattle-farming businesses are specialized and rarely sold except as part of a continuing business, they are valued using depreciated replacement cost. The administrative building of LLC Firm “Astarta-Kiev” is valued using the market approach. Estimating the fair value of property requires the exercise of judgement and the use of assumptions. Management engages external independent appraisers to estimate the fair value of property. Prior to 31 December 2007 property was stated at cost less accumulated depreciation and impairment losses.

Fair value of biological assets

Due to the lack of an active market as defined by International Financial Reporting Standard IAS 41 Agriculture, the fair value of biological assets is estimated by present valuing the net cash flows expected to be generated from the assets discounted at a current market-determined pre-tax rate. Discount rates are determined by reference to current market rates on deposits in Ukrainian hryvnia. The fair value is then reduced for estimated point-of-sale costs.

As at 30 June 2007 the estimate of fair value of dairy cattle was restated to take into account a more accurate analysis of cattle by age.

Fair value of agricultural produce

Management estimates the fair value of agricultural produce by reference to quoted prices in an active market, as defined by International Financial Reporting Standard IAS 41. In addition, point-of-sale costs at the point of harvest are estimated and deducted from the fair value. The fair value less point-of-sale costs becomes the carrying value of inventories at that date.

3 SIGNIFICANT ACCOUNTING POLICIES

The accounting policies applied in these interim condensed consolidated financial statements are the same as those applied in the consolidated financial statements as at and for the year ended 31 December 2007.

(a) Foreign currency transactions

Transactions in foreign currencies are translated to hryvnias at the foreign exchange rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are translated to hryvnias at the foreign exchange rate ruling at that date. Non monetary assets and liabilities denominated in foreign currencies, which are stated at historical cost, are translated to hryvnias at the foreign exchange rate ruling at the date of the transaction. Foreign exchange differences arising on translation are recognized in the income statement.

The principal UAH exchange rates used in the preparation of the interim condensed consolidated financial statements are as follows:

Currency Average reporting period

rate Reporting date rate

2008 2007 2008 2007 EUR 7.6565 6.7131 7.6278 6.7973 USD 4.9834 5.0500 4.8489 5.0500

Prior to April 2008, the Group used the official exchange rates of the NBU, which represented the rate at which the Group expected to settle these transactions. Beginning April 2008, the official foreign exchange rates of the NBU began to differ from the interbank foreign exchange rates, and, accordingly, the Group began using the interbank foreign exchange rates since the Group expects to settle foreign currency transactions at these rates. As at the date of these interim condensed consolidated financial statements, 17 September 2008, the average interbank exchange rate is UAH 4.8600 to USD 1.000 and UAH 6.9000 to EUR 1.000.


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(b) Property, plant and equipment

Owned assets

As at 30 June 2008 buildings held for production, selling and distribution or administrative purposes are stated at their revalued amounts, being the fair value at the date of revaluation, less any subsequent accumulated depreciation and subsequent accumulated impairment losses. At the date of the revaluation accumulated depreciation is eliminated against the gross carrying amount of the asset and the net amount restated to the revalued amount of the asset. Prior to 31 December 2007, property was stated at cost less accumulated depreciation and impairment losses. Management adopted the revaluation model for property because of the rapidly changing property market in Ukraine. Revaluations were carried out by independent appraisers and will be performed frequently enough to ensure that the fair value of a revaluated asset does not differ materially from its carrying amount at the balance sheet date.

A revaluation increase on property is recognized directly in equity, except to the extent that it reverses a previous revaluation decrease recognized in the income statement. A revaluation decrease on property is recognized in the income statement, except to the extent that it reverses a previous revaluation increase recognized directly in equity.

Upon disposal, any revaluation reserve relating to the building being sold is transferred to retained earnings.

Items of property, plant and equipment, other than buildings, acquired before 1 January 2003 are stated at deemed cost less subsequent accumulated depreciation and impairment losses. Deemed cost is based on the fair values of property, plant and equipment, other than buildings, as at 1 January 2003 based on an independent appraisal. Items of property, plant and equipment, other than buildings, acquired on or after 1 January 2003 are stated at cost less accumulated depreciation and impairment losses. The cost of self-constructed assets includes the cost of materials, direct labor and an appropriate proportion of production overheads.

Where an item of property, plant and equipment comprises major components having different useful lives, they are accounted for as separate items of property, plant and equipment.

Leased assets

Leases under which the Group assumes substantially all the risks and rewards of ownership are classified as finance leases. Property and equipment acquired by way of finance lease is stated at an amount equal to the lower of its fair value and the present value of the minimum lease payments at inception of the lease, less accumulated depreciation and impairment losses.

Subsequent expenditure

Expenditure incurred to replace a component of an item of property, plant and equipment that is accounted for separately, is capitalized and the carrying amount of the component replaced is written off. Subsequent expenditure is capitalized only when it increases the future economic benefits embodied in the item of property, plant and equipment. All other expenditures are recognized in the income statement as expenses as incurred.

Depreciation

Depreciation on property, plant and equipment is charged to the income statement on a straight-line basis over the estimated useful lives of the individual assets. Depreciation commences on the date of acquisition or, in respect of internally constructed assets, from the time an asset is completed and ready for use. Land and assets under construction are not depreciated.

The estimated useful lives are as follows:

Buildings 20-50 years Machines and equipment 10-20 years Vehicles 5-10 years Other fixed assets 3-5 years


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(c) Intangible assets

Intangible assets, which are acquired by the Group and which have finite useful lives, consist mainly from Goodwill and computer software. Software is stated at cost less accumulated amortization and impairment losses. Depreciation is charged to the income statement on a straight-line basis over the estimated useful lives, normally 4 years.

Goodwill represents the excess of the cost of the acquisition over the Group’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities of the acquiree. When the excess is negative, it is recognised immediately in the consolidated income statement. Goodwill arising on the acquisition of a minority interest in a subsidiary represents the excess of the cost of the additional investment over the carrying amount of the interest in the net assets acquired at the date of exchange. Goodwill is measured at cost less accumulated impairment losses. In respect of equity accounted investments, the carrying amount of goodwill is included in the carrying amount of the investment.

(d) Biological assets

The Group classifies livestock (primarily cattle) and crops as biological assets. Biological assets are carried at their fair value less estimated point-of-sale costs, except when the fair value cannot be measured reliably. If fair value cannot be measured reliably, biological assets are carried at cost less impairment. Point-of-sale costs include all costs that are necessary to sell the assets, excluding costs necessary to get the assets to market.

A gain or loss arising on initial recognition of a biological asset at fair value less estimated point-of-sale costs and from a change in fair value less estimated point-of-sale costs of a biological asset is included in net profit or loss for the period in which it arises.

The Group classifies biological assets as current or non-current depending upon the average useful life of the particular group of biological assets.

(e) Agricultural produce The Group classifies crops as agricultural produce. Agricultural produce harvested from biological assets is measured at its fair value less estimated point-of-sale costs at the point of harvest. A gain or loss arising on initial recognition of agricultural produce at fair value less estimated point-of-sale costs is included in net profit or loss for the period in which it arises.

(f) Financial instruments

Non-derivative financial instruments

Non-derivative financial instruments comprise investments in equity and debt securities, trade and other receivables, promissory notes, cash and cash equivalents, loans and borrowings, and trade and other payables. Non-derivative financial instruments are recognized initially at fair value plus, for instruments not at fair value through profit or loss, any directly attributable transaction costs, except as described below. Subsequent to initial recognition non-derivative financial instruments are measured as described below.

A financial instrument is recognized if the Group becomes a party to the contractual provisions of the instrument. Financial assets are derecognized if the Group’s contractual rights to the cash flows from the financial assets expire or if the Group transfers the financial asset to another party without retaining control or substantially all risks and rewards of the asset. Regular way purchases and sales of financial assets are accounted for at trade date, i.e., the date that the Group commits itself to purchase or sell the asset. Financial liabilities are derecognized if the Group’s obligations specified in the contract expire or are discharged or cancelled.

Bank overdrafts that are repayable on demand and form an integral part of cash management are included as a component of cash and cash equivalents for the purpose of the statement of cash flows.


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Held-to-maturity investments

If the Group has the positive intent and ability to hold debt securities to maturity, then they are classified as held-to-maturity. Held-to-maturity investments are measured at amortized cost using the effective interest method, less any impairment losses.

Available-for-sale financial assets

Investments in equity securities and certain debt securities are classified as available for sale financial assets. Subsequent to initial recognition, they are measured at fair value and changes therein, other than impairment losses, and foreign exchange gains and losses on available-for-sale monetary items are recognized directly in equity. When an investment is derecognized, the cumulative gain or loss in equity is transferred to profit or loss.

Investments at fair value through profit or loss

An instrument is classified at fair value through profit or loss if it is held for trading or is designated as such upon initial recognition. Financial instruments are designated at fair value through profit or loss if the Group manages such investments and makes purchase and sale decisions based on their fair value. Upon initial recognition, costs attributable to the transaction are recognized in profit or loss when incurred. Financial instruments at fair value through profit or loss are measured at fair value, and changes therein are recognized in profit or loss.

Other

Other non-derivative financial instruments are measured at amortized cost using the effective interest method, less any impairment losses. Investments in equity securities that are not quoted on a stock exchange and where fair value cannot be estimated on a reasonable basis by other means are stated at cost less impairment losses.

Fair value measurement principles

The fair value of financial instruments is based on their quoted market price at the balance sheet date without any deduction for transaction costs. If a quoted market price is not available, the fair value of the instrument is estimated using pricing models or discounted cash flow techniques.

Where discounted cash flow techniques are used, estimated future cash flows are based on management’s best estimates using a discount rate representing a market rate at the balance sheet date for an instrument with similar terms and conditions. Where pricing models are used, inputs are based on market related measures at the balance sheet date.

(g) Inventories

Inventories are stated at the lower of cost and net realizable value. Net realizable value is the estimated selling price in the ordinary course of business, less the estimated costs of completion and selling expenses. The cost of raw materials at the agricultural and sugar production facilities is determined using the weighted average method including acquisition costs incurred, such as transportation.

Work in progress and finished goods are stated at cost. Cost includes the cost of raw materials, labor and manufacturing overheads allocated proportionately to the stage of completion of the inventory.

Investments into future crops represent seeds, fertilizers and land cultivation to prepare for the subsequent growing season.

(h) Cash and cash equivalents

Cash and cash equivalents comprise cash balances and deposits with an original maturity date of three months or less.


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(i) Impairment

Financial assets

A financial asset is considered to be impaired if objective evidence indicates that one or more events have had a negative effect on the estimated future cash flows of that asset.

An impairment loss in respect of a financial asset measured at amortized cost is calculated as the difference between its carrying amount, and the present value of the estimated of the future cash flows discounted at the original effective interest rate. An impairment loss in respect of an available-for-sale financial asset is calculated by reference to its current fair value.

Individually significant financial assets are tested for impairment on an individual basis. The remaining financial assets are assessed collectively in groups that share similar credit risk characteristics.

All impairment losses are recognized in the income statement. Any cumulative loss in respect of an available-for-sale financial asset recognized previously in equity is transferred to profit or loss.

For financial assets measured at amortized cost and available-for-sale financial assets that are debt securities, the reversal is recognized in the income statement. For available-for-sale financial assets that are equity securities, the reversal is recognized directly in equity.

Non-financial assets

The carrying amounts of non-financial assets, other than inventories, biological assets, agricultural produce and deferred tax assets are reviewed at each reporting date to determine whether there is any indication of impairment. If any such indication exists then the asset’s recoverable amount is estimated. For goodwill and intangible assets that have indefinite lives or that are not yet available for use, recoverable amount is estimated at each reporting date.

An impairment loss is recognized if the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount. A cash-generating unit is the smallest identifiable asset group that generates cash flows that largely are independent from other assets and groups. Impairment losses are recognized in profit and loss. Impairment losses are recognized in respect of cash-generating units are allocated first to reduce the carrying amount of any goodwill allocated to the units and then to reduce the carrying amount of the other assets in the unit (group of units) on a pro rata basis.

The recoverable amount of an asset or cash-generating unit is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset.

Reversal of impairment

An impairment loss in respect of goodwill is not reversed. In respect of other assets, impairment losses recognized in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would been determined, net of depreciation or amortization, if no impairment loss had been recognized.

(j) Share capital and earnings per share Earnings per share are calculated by dividing net profit attributable to shareholders of the parent company by the weighted average number of shares outstanding during the period. There are no potentially dilutive shares.

(k) Income tax In accordance with the Law of Ukraine “On the Fixed Agricultural Tax”, dated 17 December 1998, as amended (the Law on Fixed Agricultural Tax), agricultural companies engaged in the production, processing and sale of agricultural products may choose to be registered as payers of fixed agricultural tax


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(FAT), provided that their sales of agricultural goods of their own production account for more than 75% of their gross revenues.

FAT is paid in lieu of corporate income tax, land tax, duties for special use of water sources, municipal tax, vehicle tax, duties for geological survey works and duties for trade patents. The amount of FAT payable is calculated as a percentage of the deemed value of all land plots (determined by the state) leased or owned by a taxpayer. The FAT regime is effective until 31 December 2009, however based on historical precedent, management expects the FAT regime to be prolonged.

In accordance with the Law on Fixed Agricultural Tax, 54 subsidiaries elected to pay FAT in lieu of other taxes in 2008. The remaining companies are subject to income taxes at a 25% rate.

For these companies, income tax on the profit or loss for the year comprises current and deferred tax. Income tax is recognized in the income statement except to the extent that it relates to items recognized directly in equity, in which case it is recognized in equity.

Current tax expense is the expected tax payable on the taxable income for the year, using tax rates enacted or substantially enacted at the balance sheet date, and any adjustment to tax payable in respect of previous years. Deferred tax is provided using the balance sheet liability method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The amount of deferred tax provided is based on the expected manner of realization or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantially enacted at the balance sheet date. No deferred tax is recognized for companies that are involved in the agricultural business and that are exempt from income taxes until 31 December 2009 as management believes it is likely that this exemption will be extended as has historically been the case.

A deferred tax asset is recognized only to the extent that it is probable that future taxable profits will be available against which the unused tax losses and credits can be utilized. Deferred tax assets are reduced to the extent that it is no longer probable that the related tax benefit will be realized.

(l) Government subsidies

The Ukrainian legislation provides for a number of different grants and tax benefits for companies involved in agricultural operations. There are grants and benefits established by Verkhovna Rada (the Parliament) as well as by the Ministry of Agrarian Policy, the Ministry of Finance, the State Committee of Water Industry, the customs authorities and local district administrations.

VAT refunds for agriculture and cattle farming

According to the Law of Ukraine, “On the Value Added Tax (VAT)”, companies that generate not less than 50% of gross revenues for the previous tax year from sales of own produced agricultural products are entitled to refunds of VAT on sales of agricultural products. The VAT on sales, net of VAT paid on purchases, is transferred to a special account, and is restricted to payments for goods and services related to agricultural activities. Until qualifying expenditures are made, the VAT is recorded as deferred government subsidy and shown in other accounts payable in the balance sheet, while corresponding amounts of cash are maintained in special purpose bank accounts. Once qualifying expenditures are made from special purpose bank accounts, the subsidy is recognized in other operating income.

In December 2007, this VAT refund was extended to 1 January following the year in which the Parliament ratifies the protocol on the accession of Ukraine to the World Trade Organization, which occurred on 10 April 2008. When the VAT refund ceases on 1 January 2009 agricultural producers will be subject to VAT on sales at a 12% rate, while the VAT rate on purchases will be 20%. The change in VAT rate from 20% to 12% does not affect the eligibility for retention of the net VAT liability arising from sales of agricultural products.

Nevertheless, the decrease of the VAT rate from 20% to 12% will result in a decrease of VAT refunds available to the Group.


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Government Grants Related to Crop Growing

The amount of this type of subsidy is calculated based on the number of hectares sowed with a particular crop. In particular, the companies growing winter wheat and rye, spring wheat, oats, peas, buckwheat and millet receive subsidies of UAH 100 (Euro 13) per hectare of the planted area. The subsidy for growing soy beans is UAH 80 (Euro 10), and sugar beet is UAH 750 (Euro 98) per hectare.

The amount of reimbursement is based on a variety of factors. The Group recognizes these subsidies when received due to the uncertainty in the amount and timing of receipt.

Government Grants Related to Processing of Animal Products

Agricultural producers who breed poultry and cattle are entitled to state subsidies for every item of poultry or cattle either slaughtered at their (owned or leased) facilities or transferred for slaughtering and processing to other entities. As from 1 January 2008, financial support for bred and slaughtered cattle and poultry is granted in the following amounts: UAH 1.90 (Euro 0.23) per kilogramme of beef, UAH 1.40 (Euro 0.18) per kilogramme of pork and UAH 0.65 (Euro 0.09) per kilogramme of poultry, in each case based on live weight at time of slaughter.

Partial Compensation for Finance Costs and Other Subsidies

Companies that are subject to the FAT are also eligible for reimbursement by the government for a portion of interest incurred on borrowings. The amount of interest subsidy depends on the terms and purposes of financing obtained from banks. The interest subsidy falls within the range of 7-9% and 10-14% for loans received in foreign and local currency, respectively. Because the interest subsidy is payable only when the governmental budget allows, it is recorded on the cash basis, and is reflected in other operating income.

The Group is entitled to receive reimbursement from various government programs for the cost of agricultural machinery produced in Ukraine, insurance of agricultural produce losses and fertilizers produced in Ukraine. Agricultural producers are required to meet certain conditions to qualify for these subsidies.

(m) Revenues

Revenues from the sale of goods are recognized in the income statement when the significant risks and rewards of ownership are transferred to the buyer. No revenues are recognized if there are significant uncertainties regarding recovery of the consideration due, associated costs or the possible return of goods.

(n) Non-monetary transactions The Group enters into non-cash transactions as is common with many Ukrainian companies. These transactions involve tolling schemes and provision of inventories and agricultural services in exchange for sugar beets. Non-cash transactions consist of mutual settlements arising from the exchange of goods and services, and transactions that are settled by means of promissory notes. Approximately 1% of revenues and purchases during the six months ended 30 June 2008 are received and paid for in the form of non-cash transactions (2007: 2%). Mutual settlement transactions are centrally managed. Prices are usually fixed in contracts with the mutual settlement transactions valued and recorded at the market prices for the goods involved in the transaction. Non-cash sales and purchases are accounted for on an accrual basis in the same manner as traditional cash transactions.

(o) Expenses

Expenses are accounted for on an accrual basis.

(p) Operating lease payments

Payments made under operating leases are recognized in the income statement on a straight-line basis over the term of the lease. Lease incentives received are recognized in the income statement as an integral part of the total lease payments made.


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(q) Net financial expense

All interests and other costs incurred in connection with borrowings are expensed as incurred as part of net financing costs. The interest expense component of finance lease payments is recognized in the income statement using the effective interest rate method.

(r) Employee benefits

The Group is committed to reimburse employees for all expenses incurred in case of injuries at work. These amounts are expensed when they are incurred.

Furthermore, the Group makes contributions into the Ukrainian state pension fund based on each employee’s wage. These amounts are expensed when they are incurred.

The Group is also obligated to make contributions to certain defined benefit plans. Neither the contributions nor obligations are significant to these interim condensed consolidated financial statements.

(s) Offsetting Financial assets and liabilities are offset and the net amount is reported in the interim condensed consolidated financial statements only when there is a legally enforceable right to offset the recognized amounts, and there is an intention to either settle on a net basis, or to realize the asset and settle the liability simultaneously.

(t) New standards and interpretations not yet adopted

A number of new standards, amendments to standards and interpretations are not yet effective, and have not been applied in preparing these interim condensed consolidated financial statements. Of these pronouncements, the following will potentially have an impact on future consolidated financial statements:

• International Financial Reporting Standard IAS 23 Borrowing Costs is effective for annual periods beginning on or after 1 January 2009. The new International Financial Reporting Standard eliminates the option of immediately expensing borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset.

• Revised International Financial Reporting Standard IFRS 3 Business Combinations (2008) is effective for annual periods beginning on or after 1 January 2010. The revised standard incorporates the following changes that are likely to be relevant to the Group’s operations: – the definition of a business has been broadened, which is likely to result in more acquisitions

being treated as business combinations – contingent consideration will be measured at fair value, with subsequent changes therein

recognised in the consolidated income statement – transaction costs, other than share and debt issue costs, will be expensed as incurred – any pre-existing interest in the acquiree will be measured at fair value with the gain or loss

recognised in the consolidated income statement – any non-controlling (minority) interest will be measured at either fair value, or at its proportionate

interest in the identifiable assets and liabilities of the acquiree, on a transaction-by-transaction basis

The standard will be applied prospectively and therefore there will be no impact on prior periods in the consolidated financial statements as at and for the year ended 31 December 2010.

• Revised International Financial Reporting Standard IAS 1 Presentation of Financial Statements (2007) is effective for annual periods beginning on or after 1 January 2009. The revised standards introduces the term total comprehensive income, which represents changes in equity during a period other than those changes resulting from transactions with owners in their capacity as owners. Total comprehensive income may be presented in either a single statement of comprehensive income (effectively combining both the income statement and all non-owner changes in equity in a single statement), or in an income statement and a separate statement of comprehensive income.


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• Amended International Financial Reporting Standard IAS 27 Consolidated and Separate Financial Statements (2008) is effective for annual periods beginning on or after 1 January 2010. The amended standard requires accounting for changes in ownership interests by the Group in a subsidiary, while maintaining control, to be recognised as an equity transaction. When the Group loses control of a subsidiary, any interest retained in the former subsidiary will be measured at fair value with the gain or loss recognised in the consolidated income statement.

Management is currently studying what effect these new statements and amendments may have on the financial position and results of operations.

4 RESTATEMENTS AND RECLASSIFICATIONS

Restatement of the fair value of dairy cattle

As at 31 December 2007, management restated the estimate of fair value of dairy cattle in order to take into account a more accurate analysis of cattle by age.

Because of low margins in cattle farming business in the past, previously, the fair value of dairy cattle equaled the net present value of estimated future cash flows to be generated by cows during one year after the balance sheet date.

Beginning on 31 December 2007, management determined that the estimate of the fair value of dairy cattle should equal the net present value of estimated future cash flows to be generated by cows during their remaining productive lives after the balance sheet date. The average productive life of a cow is 5 years.

This technique is used due to the absence of an active, transparent market for dairy cattle in Ukraine. Management uses the assistance of independent appraisers in the estimation of future cash flows.

International Financial Reporting Standard IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors requires the restatement of the opening balances of assets, liabilities and equity for the earliest period for which retrospective restatement is practicable. Management restated the carrying value of dairy cattle as at 31 December 2006. The effect of this restatement is as follows:

30 June 2007 31 December 2006


as originally reported adjustment

as restated


as restated

Biological assets - dairy cattle, non-current

24,938 8,504 33,442 16,422 7,833 24,255

Biological assets - dairy cattle, current

11,484 24,003 35,487 13,513 10,377 23,890

Retained earnings 22,759 18,210 40,969 Changes in fair value of non-current dairy cattle 7,203 671 7,874 - - -

Changes in fair value of current dairy cattle (2,471) 13,626 11,155 - - -

Net profit 43,265 14,297 57,562 - - -


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30 June 2007 31 December 2006



as restated


as restated

Biological assets - dairy cattle, non-current 3,669 1,251 4,920 2,469 1,179 3,648

Biological assets - dairy cattle, current 1,689 3,532 5,221 2,032 1,559 3,591

Retained earnings - - - 3,516 2,738 6,254 Changes in fair value of non-current dairy cattle 1,073 72 1,145 - - -

Changes in fair value of current dairy cattle

(368) 1,973 1,605 - - -

Net profit 6,445 2,045 8,490 - - -

The restatement had no deferred tax effect since all the cattle are owned by subsidiaries registered as FAT payers.

Reclassifications in the balance sheet as at 30 June 2007

Certain reclassifications are made to financial statements as at 30 June 2007 in order to conform to the current year presentation:

• Minority interests relating to limited liability companies are reclassified from current liabilities to non-current liabilities. Such treatment is based on clarification of Ukrainian legislation relating to limited liability companies made available at the end of 2007. The effect of this reclassification as at 30 June 2007 is as follows:

(in thousands of Ukrainian hryvnias) as originally

reported adjustment as reclassified Minority interests relating to limited

liability companies, non-current - 18,982 18,982 Minority interests relating to limited

liability companies, current 18,982 (18,982) -

(in thousands of Euros) as originally

reported adjustment as reclassified Minority interests relating to limited

liability companies, non-current - 2,793 2,793 Minority interests relating to limited

liability companies, current 2,793 (2,793) -

• As at 30 June 2007 finance lease liabilities and interest-bearing vendor financing arrangements amounting to UAH 2,554 thousand (EUR 376 thousand) and UAH 5,842 thousand (EUR 859 thousand), respectively, were previously presented in other long-term liabilities. These liabilities are now reported in loans and borrowings. The effect of this reclassification as at 30 June 2007 is as follows:


reported adjustment as reclassified Loans and borrowings 73,900 8,396 82,296 Other long-term liabilities 14,539 (8,396) 6,143


31


reported adjustment as reclassified Loans and borrowings 10,872 1,235 12,107 Other long-term liabilities 2,139 (1,235) 904

• As at 30 June 2007 current portion of finance lease liabilities and interest-bearing vendor financing

arrangements amounting to UAH 1,070 thousand (EUR 157 thousand) and UAH 2,438 thousand (EUR 359 thousand), respectively, were previously presented in other liabilities and accounts payable. These liabilities are now reported in current portion of loans and borrowings. The effect of this reclassification as at 30 June 2007 is as follows:


reported adjustment as reclassified Current portion of loans and borrowings 6,842 3,508 10,350 Other liabilities and accounts payable 48,468 (3,508) 44,960


reported adjustment as reclassified Current portion of loans and borrowings 1,007 516 1,523 Other liabilities and accounts payable 7,130 (516) 6,614

Reclassifications in the income statement for the six months ended 30 June 2007

• Changes in the fair value of biological assets of UAH 60,979 thousand (EUR 9,084 thousand) for the six months ended 30 June 2007 were previously reported in other operating income . They are now presented as a separate line item in the income statement. The effect of this reclassification for the six months ended 30 June 2007 is as follows:


reported adjustment as reclassified Changes in fair value of biological assets - 60,979 60,979 Other operating income 73,171 (60,979) 12,192


reported adjustment as reclassified Changes in fair value of biological assets - 9,084 9,084 Other operating income 10,901 (9,084) 1,817


32

5 ACQUISITION OF SUBSIDIARIES

During the six months ended 30 June 2008, the Group completed acquisitions of 18 entities. The purchase consideration consisted only of cash, and the direct costs related to these acquisitions are not significant.

Name Country of

incorporation Activity

Date of acquisition

% of ownership as at the date of

acquisition LLC “STOV Nadiya” Ukraine Agricultural 07.02.2008 74.99% LLC “Khmilnitske” Ukraine Agricultural 01.04.2008 79.98% LLC “Avangard” Ukraine Agricultural 01.04.2008 82.13% Private Company “Galichanka” Ukraine Agricultural 02.04.2008 99.98% LLC “Khliborob” Ukraine Agricultural 03.04.2008 74.99% SC “Avratin-agro” Ukraine Agricultural 10.04.2008 99.98% Private Company “Agrometa” Ukraine Agricultural 10.04.2008 99.98% LLC “SVK Ranok” Ukraine Agricultural 10.04.2008 82.48% LLC “SVK Niva” Ukraine Agricultural 10.04.2008 79.64% Private Company “Agro-Nadra” Ukraine Agricultural 10.04.2008 99.98% LLC “Volochysk-Agro” Ukraine Agricultural 10.04.2008 99.98% LLC “Khlibny Dar” Ukraine Agricultural 16.04.2008 74.99% LLC “Bagrinivske” Ukraine Agricultural 17.04.2008 74.99% LLC “List-Ruchky” Ukraine Agricultural 24.04.2008 74.99% LLC “Niva-Agro-K” Ukraine Agricultural 30.04.2008 74.99% LLC “Chervona Zirka” Ukraine Agricultural 30.04.2008 74.99% LLC “Agropromgaz” Ukraine Trade 03.06.2008 89.98% Private Company “Smotrych-PD” Ukraine Agricultural 20.06.2008 99.98%

None of these acquisitions is individually significant, and accordingly, information on these acquisitions is presented in aggregate. The acquisition of these companies during six months ended 30 June 2008, had the following effect on assets and liabilities, which are stated at their fair values, as at the date they were acquired:


33

Recognised fair value at acquisition date

(in thousands of Ukrainian

hryvnias) (in thousands

of Euros) (unaudited) (unaudited)

Non-current assets Property, plant and equipment 15,235 1,965 Construction in progress 386 50 Non-current biological assets 1,279 165 Other non-current assets 445 57 Current assets Inventories 29,882 3,855 Current biological assets 5,665 731 Trade accounts receivable 5,039 650 Other accounts receivable and prepayments 4,826 623 Cash and cash equivalents 1,375 177 Non-current liabilities Other long-term liabilities (426) (55) Current liabilities Short-term loans and borrowings (1,283) (166) Trade accounts payable (11,870) (1,531) Other liabilities and accounts payable (18,686) (2,407) Minority interest acquired (3,679) (475)

Net identifiable assets, liabilities and contingent liabilities 28,188 3,639

Excess of net assets acquired over consideration paid : acquisitions from third parties 18,917 2,443 acquisitions from entities under common control (460) (59) Goodwill (3,145) (406) Consideration paid (12,876) (1,661) Cash acquired 1,375 177

Net cash outflow (11,501) (1,484)

As at the date of these interim condensed consolidated financial statements, the land lease rights acquired in business combinations are not recognised as part of the identifiable intangible assets at the dates of acquisition as determination of their fair values has historically been impracticable due to a lack of transparent transactions and a limited number of transactions. Due to the development of the agricultural sector in Ukraine, and more transparency into land lease transactions, management believes determination of the fair value of land lease is now feasible. Accordingly, management will commission an independent appraiser to perform the assessment of the land lease rights fair values and will amend the allocation, at the acquisition date, of the cost of the business combinations to the assets and liabilities acquired.


34

During the six months ended 30 June 2007 the Group acquired the companies listed below. The purchase consideration consisted entirely of cash, and the direct costs related to these acquisitions were not significant.

Name Country of

incorporation Activity

Date of acquisition

% of ownership as at the date of

acquisition LLC “Agricultural Company “HTZ” Ukraine Agricultural 21.03.2007 99.98% OJSC “Agricultural Company “Agrocomplex”

Ukraine Agricultural 28.03.2007 71.44%

LLC “Agricultural Company “Stozhary” Ukraine Agricultural 24.05.2007 63.99% None of these acquisitions is individually material, and accordingly, information on these acquisitions is presented in aggregate. The acquisition of these companies during six months ended 30 June 2007, had the following effect on assets and liabilities, which are stated at their fair values, as at the date they were acquired:

Recognised fair value at acquisition date


hryvnias) (in thousands

of Euros) (unaudited) (unaudited)

Non-current assets Property, plant and equipment 5,600 834 Current assets Inventories 526 78 Current biological assets 1,722 257 Trade accounts receivable 909 135 Other accounts receivable and prepayments 298 44 Promissory notes received 2,417 360 Cash and cash equivalents 15 2 Non-current liabilities Long-term loans and borrowings (70) (10) Current liabilities Trade accounts payable (3,201) (477) Other liabilities and accounts payable (2,964) (442) Minority interest acquired (1,059) (158)

Net identifiable assets, liabilities and contingent liabilities 4,193 623

Excess of net assets acquired over consideration paid : acquisitions from third parties 704 105 acquisitions from entities under common control 2,067 306 Consideration paid (1,422) (212) Cash acquired 15 2

Net cash outflow (1,407) (210)

It is not practicable to determine what would be the total revenue and net profit for the six months ended 30 June 2008 had the acquisitions occurred on 1 January 2008 in accordance with IFRS because the


35

acquired companies’ financial statements were prepared only in accordance with Ukrainian National Accounting Standards, which are significantly different from IFRSs.

The excess of net assets acquired over the consideration paid is recognized in the income statement as a gain on acquisition of subsidiaries. This gain arises because the fair value of the acquired non-monetary assets exceeds the amount paid for those assets. This situation is due to the significant risks involved in agricultural business in Ukraine, the lack of financial resources in the acquired companies which prevents them from efficient use of their assets, and a lack of interested buyers.

6 PROPERTY, PLANT AND EQUIPMENT

During the six months ended 30 June 2008 the Group acquired property, plant and equipment with a cost of UAH 147,474 thousand, or EUR 19,228 thousand (six months ended 30 June 2007: UAH 60,327 thousand, or EUR 8,986 thousand), including assets from acquired companies (see note 5) of UAH 15,621 thousand, or EUR 2,015 thousand (six months ended 30 June 2007: UAH 5,600 thousand, or EUR 834 thousand).

Property, plant and equipment with a carrying amount of UAH 4,500 thousand, that is EUR 588 thousand, were disposed during the six months ended 30 June 2008 (six months ended 30 June 2007: UAH 3,648 thousand; EUR 542 thousand).

Leased assets, where the Group is a lessee under a finance lease arrangements, comprise machinery and equipment. A summary of activity for the six months ended 30 June is as follows:


hryvnias) (in thousands of Euros) 2008 2007 2008 2007 (unaudited) (unaudited) (unaudited) (unaudited) Lease right, 1 January 25,917 4,205 3,429 627 Accumulated depreciation, 1 January (695) (98) (102) (16) Depreciation charge (734) (86) (96) (13) Currency translation difference - - (21) (6)

Net book value at 30 June 24,488 4,021 3,210 592


36

7 BIOLOGICAL ASSETS

Biological assets comprise the following groups:

(in thousands of Ukrainian hryvnias) 30 June 2008 31 December 2007 30 June 2007

Units Amount Units Amount Units Amount (unaudited) (audited) (unaudited) (restated) Non-current biological assets: Cattle 6,022 42,332 5,479 46,510 4,758 33,442 Other livestock 1,232 821 375

43,564 47,331 33,817

Current biological assets: Cattle 12,890 52,310 9,987 50,820 9,090 35,487 Other livestock 1,567 796 1,046

53,877 51,616 36,533

Crops: Hectares Hectares Hectares Sugar beet 29,944 144,382 - - 22,211 73,107 Wheat 29,425 88,734 24,592 55,764 18,067 36,778 Sunflower 10,866 67,311 - - 7,303 24,224 Barley 23,549 51,889 1,364 3,083 14,827 28,875 Corn 11,449 45,730 - - 7,007 20,015 Soy 12,535 32,144 - - 9,934 14,774 Rape 2,067 10,467 - - - - Rye 1,809 3,204 1,538 2,429 328 581 Other 1,710 3,123 - - 1,709 1,995

123,354 446,984 27,494 61,276 81,386 200,349

500,861 112,892 236,882

Total biological assets 544,425 160,223 270,699


37

(in thousands of Euros) 30 June 2008 31 December 2007 30 June 2007 Units Amount Units Amount Units Amount (unaudited) (audited) (unaudited) (restated) Non-current biological assets: Cattle 6,022 5,550 5,479 6,269 4,758 4,920 Other livestock 162 111 55

5,712 6,380 4,975

Current biological assets: Cattle 12,890 6,858 9,987 6,850 9,090 5,221 Other livestock - 205 107 154

7,063 6,957 5,375

Crops: Hectares Hectares Hectares Sugar beet 29,944 18,928 - - 22,211 10,755 Wheat 29,425 11,633 24,592 7,516 18,067 5,411 Sunflower 10,866 8,824 - - 7,303 3,564 Barley 23,549 6,803 1,364 416 14,827 4,248 Corn 11,449 5,995 - - 7,007 2,945 Soy 12,535 4,214 - - 9,934 2,173 Rape 2,067 1,372 - - - - Rye 1,809 420 1,538 327 328 86 Other 1,710 410 - - 1,709 293

123,354 58,599 27,494 8,259 81,386 29,475

65,662 15,216 34,850

Total biological assets 71,374 21,596 39,825

Non-current cattle are represented by dairy livestock with an average annual lactation period of nine months. Current cattle comprise immature cattle and cattle intended for sale. Other biological assets mainly represent pigs, horses and sheep.

The valuation, which conforms to International Valuation Standards, was performed by estimating the present value of the net cash flows expected to be generated from biological assets discounted at a current market discount rate.

Fair values of biological assets were based on the following key assumptions: • For crops, revenues are projected based on the expected volume of harvested grains and oilseeds.

For dairy cattle, revenues are projected based on the expected milk produced during their productive life after the reporting date and expected volume of meat at the date of slaughter.

• The average productive life of a cow is based on internal statistical information. • Prices for grains, oilseeds, milk and meat are obtained from state statistical reports as at the end of

the reporting period. • Production and point-of-sale costs are projected based on actual operating costs. • The growth in sales prices as well as in production and point-of-sale costs is assumed to be in line

with forecasted consumer price index in Ukraine.


38

• A pre-tax discount rate of 15% is applied in determining fair value of biological assets. The discount rate is based on the average cost of capital for the Group in Ukraine as at the reporting date.

The key assumptions represent management’s assessment of future trends in agriculture and the cattle farming business and are based on both external and internal sources of data.

Changes in key assumptions used to estimate biological assets would have the following effect on biological assets and on earnings per share attributable to shareholders of the parent as at and for the six months ended 30 June 2008:

Effect on biological assets Effect on earnings per share

thousands of

Ukrainian hryvnias

thousands

of Euros

Ukrainian hryvnias

Euros

1% increase in discounting rate (1,616) (212) (0.06) (0.01) 1% decrease in discounting rate 1,663 218 0.07 0.01 10% increase in price for milk 9,412 1,234 0.38 0.05 10% decrease in prices for milk (9,412) (1,234) (0.38) (0.05) 10% increase in price for meat 2,377 312 0.10 0.01 10% decrease in price for meat (2,377) (312) (0.10) (0.01) 10% increase in prices for crops 59,065 7,743 2.36 0.31 10% decrease in prices for crops (59,065) (7,743) (2.36) (0.31) 5% increase in annual consumer price index 854 112 0.03 0.00 5% decrease in annual consumer price index (648) (85) (0.03) (0.00)

The following represents the changes during the six months ended 30 June in the carrying amounts of non-current and current biological assets:


Non-current

livestock

Current livestock

Crops Total

(unaudited) (unaudited) (unaudited) (unaudited) As at 1 January 2008 47,331 51,616 61,276 160,223

Purchases 188 1,614 - 1,802 Additions from acquisitions of subsidiaries 1,279 5,665 - 6,944 Investments into livestock and future crops 491 10,729 296,784 308,004 (Loss) gain arising from changes in fair value attributable to physical changes and to changes in market prices (8,192) (6,111) 88,924 74,621

Transfers 2,646 (2,646) - - Sales (179) (6,990) - (7,169)

As at 30 June 2008 43,564 53,877 446,984 544,425


39


Non-current

livestock

Current livestock

Crops Total

(unaudited) (unaudited) (unaudited) (unaudited) As at 1 January 2008 6,380 6,957 8,259 21,596

Purchases 25 211 - 236 Additions from acquisitions of subsidiaries 165 731 - 896 Investments into livestock and future crops 64 1,401 38,762 40,227 (Loss) gain arising from changes in fair value attributable to physical changes and to changes in market prices (1,067) (796) 11,559 9,696

Transfers 346 (346) - - Sales (23) (913) - (936) Currency translation difference (178) (182) 19 (341)

As at 30 June 2008 5,712 7,063 58,599 71,374


Non-current

livestock Current

livestock Crops Total

(unaudited) (unaudited) (unaudited) (unaudited) As at 1 January 2007, restated 24,614 25,692 21,908 72,214

Purchases 3 253 - 256 Additions from acquisitions of subsidiaries - 1,722 1,722 Investments into livestock and future crops - 4,067 122,645 126,712 Gain (loss) arising from changes in fair value attributable to physical changes and to changes in market prices 7,203 (2,471) 55,796 60,528

Transfers 1,375 (1,375) - - Sales (49) (4,981) - (5,030) Restatement of the fair value of dairy cattle 671 13,626 - 14,297

As at 30 June 2007, restated 33,817 36,533 200,349 270,699


40


Non-current

livestock

Current livestock

Crops Total

(unaudited) (unaudited) (unaudited) (unaudited) As at 1 January 2007, restated 3,701 3,863 3,294 10,858

Purchases - 38 - 38 Additions from acquisitions of subsidiaries - 257 - 257 Investments into livestock and future crops - 606 18,269 18,875 Gain (loss) arising from changes in fair value attributable to physical changes and to changes in market prices 1,073 (368) 8,312 9,017

Transfers 205 (205) - - Sales (7) (742) - (749) Currency translation difference (69) (47) (400) (516) Restatement of the fair value of dairy cattle 72 1,973 - 2,045

As at 30 June 2007, restated 4,975 5,375 29,475 39,825

Risk management in the agricultural business

The Group is exposed to a number of risks related to its biological assets:

Price fluctuation risk

The Group is exposed to financial risks arising from changes in sugar, grains, oilseeds and milk prices. The Company does not anticipate that prices for its main products will decline significantly in the foreseeable future and, therefore, has not entered into derivative or other contracts to manage the risk of a decline in prices. Management reviews its outlook for sugar, grains, oilseeds and milk prices regularly in considering the need for active financial risk management.

Climate and other risks

Biological assets are exposed to the risk of damage from climatic changes, diseases, fires and other natural forces. The Group has extensive processes in place aimed at monitoring and mitigating those risks, including regular field and farm inspections and industry pest and disease surveys. The Group also insures itself against natural disasters.

Regulatory and environmental risks

Operations are subject to laws and regulations adopted in Ukraine. The Group has established environmental policies and procedures aimed at compliance with Ukrainian environmental and other laws. Management performs regular reviews to identify environmental risks and to ensure that the systems in place are adequate to manage those risks.


41

8 FINANCIAL INSTRUMENTS HELD-TO-MATURITY

Financial instruments held-to-maturity are as follows:


Interest rate Due date

30 June 2008

31 December

2007 30 June

2007 (unaudited) (audited) (unaudited)

Bonds receivable

16.0-18.0%

21 June 2009 -

4,287 3,451

Investments held-to-maturity 2071 700 700

2,071 4,987 4,151

(in thousands of Euros) Interest

rate Due date 30 June

2008

31 December

2007 30 June

2007 (unaudited) (audited) (unaudited)

Bonds receivable

16.0-18.0%

21 June 2009 -

578 508

Investments held-to-maturity 272 94 103

272 672 611

9 INVESTMENTS

Investments are as follows:

(in thousands of Ukrainian hryvnias) 30 June

2008

31 December

2007 30 June

2007 (unaudited) (audited) (unaudited) Equity accounted investments in agricultural partnership 1,838

1,037 -

Other equity accounted investments 759 758 172

2,597 1,795 172

(in thousands of Euros) 30 June

2008

31 December

2007 30 June

2007 (unaudited) (audited) (unaudited) Equity accounted investments in agricultural partnership 241

140 -

Other equity accounted investments 100 102 25

341 242 25


42

Equity accounted investments in agriculture partnerships represent non-controlling stakes in entities formed to manage assets of non-operating state agriculture companies. Other equity accounted investments represent non-controlling stakes acquired with new companies. All equity investments are stated at cost as they have no quoted price in an active market.

10 INVENTORIES

Inventories are as follows:


2008

31 December

2007 30 June

2007 (unaudited) (audited) (unaudited) Finished goods: Sugar 33,443 185,200 80,950 Agricultural produce 23,401 78,392 5,498 Cattle 6,328 3,425 3,380 Other 3,054 2,346 4,259 Raw materials and consumables for: Sugar 42,291 14,624 48,630 Agricultural produce 59,738 40,660 22,936 Cattle 5,925 1,899 3,716 Other 4,825 3,210 1,903 Investments into future crops 19,797 54,981 5,853

198,802 384,737 177,125


2008

31 December

2007 30 June

2007 (unaudited) (audited) (unaudited) Finished goods: Sugar 4,384 24,961 11,909 Agricultural produce 3,068 10,566 808 Cattle 830 462 497 Other 400 316 627 Raw materials and consumables for: Sugar 5,545 1,971 7,154 Agricultural produce 7,832 5,480 3,374 Cattle 777 256 547 Other 633 433 280 Investments into future crops 2,595 7,410 861

26,064 51,855 26,057


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11 TRADE ACCOUNTS RECEIVABLE

Trade accounts receivable are as follows:


30 June

2008

31 December

2007 30 June

2007 (unaudited) (audited) (unaudited) Trade receivables 91,643 68,267 106,260 Less provision for impairment (note 17) (7,783) (8,239) (4,385)

83,860 60,028 101,875


30 June

2008

31 December

2007 30 June

2007 (unaudited) (audited) (unaudited) Trade receivables 12,014 9,201 15,633 Less provision for impairment (note 17) (1,020) (1,110) (645)

10,994 8,091 14,988

Trade receivables that are less than one month past due are not considered impaired. As at 30 June 2008 trade receivables of UAH 45,452 thousand (30 June 2007: UAH 10,001 thousand) or EUR 5,959 thousand (30 June 2007: EUR 1,471 thousand) are past due but not impaired. These relate to a number of existing customers for whom there is no recent history of credit problems and where management believes collection is probable.

12 OTHER ACCOUNTS RECEIVABLE AND PREPAYMENTS

Other accounts receivable and prepayments are as follows:


30 June

2008

31 December

2007 30 June

2007 (unaudited) (audited) (unaudited) Taxes recoverable and prepaid 59,458 43,143 28,876 Advances to suppliers 19,755 23,199 21,740 Other receivables 25,088 13,134 20,263 Less provision for impairment (note 17) (3,700) (3,967) (4,005)

100,601 75,509 66,874


44


2008

31 December

2007 30 June

2007 (unaudited) (audited) (unaudited) Taxes recoverable and prepaid 7,795 5,815 4,249 Advances to suppliers 2,589 3,126 3,198 Other receivables 3,290 1,770 2,981 Less provision for impairment (note 17) (485) (535) (589)

13,189 10,176 9,839

13 SHARE CAPITAL

ASTARTA Holding N.V. has one class of common shares with par value of EUR 0.01. All shares have equal voting rights. The number of authorized shares as at 30 June 2008 is 30,000 thousand (2007: 30,000 thousand) and the number of issued and fully paid-up shares is 25 thousand (2007: 25 thousand).

Share capital is as follows:

(in thousands of Ukrainian hryvnias) 30 June 2008 31 December 2007

Amount % Amount % Astarta Holding N.V. Ivanchyk V.P. 665 40.00% 665 40.00% Korotkov V.M. 665 40.00% 665 40.00% ING Parasol Specjalistyczny Fundusz

Inwestycyjny - - 90 5.39% Other shareholders 333 20.00% 243 14.61%

1,663 100.00% 1,663 100.00%

(in thousands of Euros) 30 June 2008 31 December 2007

Amount % Amount % Astarta Holding N.V. Ivanchyk V.P. 100 40.00% 100 40.00% Korotkov V.M. 100 40.00% 100 40.00% ING Parasol Specjalistyczny Fundusz

Inwestycyjny - - 13 5.39% Other shareholders 50 20.00% 37 14.61%

250 100.00% 250 100.00%

Capital risk management

The objectives when managing capital are to safeguard the Group’s ability to continue as a going concern in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the cost of capital. The policy is to maintain a strong capital base so as to maintain investor, creditor and market confidence and to sustain future development of the business.


45

The Board of Directors monitors both the composition of shareholders, as well as the return on capital. The Board seeks to maintain a balance between the higher returns that might be possible with higher levels of borrowings and the advantages and security afforded by a sound capital position.

Consistent with others in the industry, the group monitors capital on the basis of the gearing ratio. This ratio is calculated as net debt divided by total capital. Net debt is calculated as total borrowings (including current and non-current borrowings as shown in the interim condensed consolidated balance sheet) less cash and cash equivalents. Total capital is calculated as equity as shown in the interim condensed consolidated balance sheet plus net debt.

During 2008, the strategy, which is unchanged from 2007, is to maintain the gearing ratio below 45%. The gearing ratios as at 30 June are as follows:


hryvnias) (in thousands of Euros) 2008 2007 2008 2007 (unaudited) (unaudited) (unaudited) (unaudited) Total borrowings (note 15) 498,182 254,416 65,312 37,429 Less cash and cash equivalents (23,297) (5,321) (3,054) (783)

Net debt 474,885 249,095 62,258 36,646 Total equity 869,658 466,280 114,013 68,599

Total capital 1,344,543 715,375 176,271 105,245

Gearing ratio 35% 35% 35% 35%

The Group does not purchase its own shares on the market. There were no changes in the approach to capital management during the reporting period. No companies in the Group are subject to externally imposed capital requirements.

Dividend policy

The dividend policy is to pay dividends at a level consistent with the Group’s growth and development plans, while maintaining a reasonable level of liquidity. The current intention of the Board of Directors is to recommend to the General Meeting of Shareholders that no dividends be declared until approval by the General Meeting of Shareholders of the financial statements for the year ending 31 December 2008.

The dividend policy will, however, be reviewed from time to time and payment of any future dividends will be effectively at the discretion of the Board of Directors and the General Meeting of Shareholders after taking into account various factors including business prospects, future earnings, cash requirements, financial position, expansion plans and requirements of Dutch law. In addition, payment of future dividends may be made only if shareholders’ equity exceeds the sum of the paid-in share capital plus the reserves required to be maintained by law and by the Articles of Association. All shares carry equal dividend rights.


46

14 MINORITY INTERESTS

The movements in minority interests for the six months ended 30 June are as follows:


hryvnias) (in thousands of Euros) 2008 2007 2008 2007 (unaudited) (unaudited) (unaudited) (unaudited) Balance as at 1 January 33,977 13,961 4,580 2,099 Share in profit of limited liability companies subsidiaries

9,572 4,906 1,245 731

Share in profit of open joint stock companies subsidiaries

1,235 96 165 14

Acquisitions from minority shareholders 411 - 53 - Minority interests acquired with new subsidiaries

3,679 1,059 475 158

Currency translation difference - - (111) (56)

Balance as at 30 June 48,874 20,022 6,407 2,946

15 LOANS AND BORROWINGS

This note provides information about the contractual terms of loans and borrowings. Refer to note 30 for more information about exposure to interest rate and foreign currency risk. Loans and borrowings are as follows:


2008

31 December

2007 30 June

2007 (unaudited) (audited) (unaudited) Long-term loans and borrowings: Bank loans 42,082 30,638 41,327 Borrowings from non-financial institutions - - 1,622 Finance lease liabilities 17,091 5,880 2,554 Interest-bearing vendor financing аrrangements 4,551 5,379 5,842 Bonds payable - - 30,951

63,724 41,897 82,296

Current portion of long-term loans and borrowings: Bank loans 17,734 10,671 6,842 Finance lease liabilities 3,930 2,362 1,070 Interest-bearing vendor financing аrrangements 2,068 2,897 2,438 Bonds payable 15,000 15,000 -

38,732 30,930 10,350

Short-term loans and borrowing 395,726 307,648 161,770

498,182 380,475 254,416


47


2008

31 December

2007 30 June

2007 (unaudited) (audited) (unaudited) Long-term loans and borrowings: Bank loans 5,517 4,130 6,080 Borrowings from non-financial institutions - - 239 Finance lease liabilities 2,241 792 376 Interest-bearing vendor financing аrrangements 597 725 859 Bonds payable - - 4,553

8,355 5,647 12,107

Current portion of long-term loans and borrowings: Bank loans 2,325 1,439 1,007 Finance lease liabilities 515 318 157 Interest-bearing vendor financing аrrangements 271 390 359 Bonds payable 1,966 2,022 -

5,077 4,169 1,523

Short-term loans and borrowing 51,880 41,465 23,799

65,312 51,281 37,429

Bonds payable include UAH denominated general obligation bonds issued by APO “Tsukrovyk Poltavshchyny” in August 2005. The face value of each bond is UAH 1,000 (Euro 131) and as at 30 June 2008 UAH 15,000 thousand (EUR 1,966 thousand) are outstanding (30 June 2007: UAH 14,272 thousand; (EUR 2,100 thousand). The bonds pay fixed interest at 15.0% and are subject to redemption and further placement semi-annually beginning November 2005 until July 2008.

During the six months ended 30 June 2008 UAH 10,900 thousand (EUR 1,429 thousand) Series A bonds issued on 16 June 2006 by Astarta-Kiev were redeemed and resold. As at 30 June 2008 UAH 10,900 thousand (EUR 1,429 thousand) are outstanding. The bonds mature on 16 June 2009 and pay fixed interest at 8%.

During the six months ended 30 June 2008 UAH 15,000 thousand (EUR 1,966 thousand) Series B bonds issued on 26 June 2006 by APO “Tsukrovyk Poltavshchyny” were sold to third parties. As at 30 June 2008 UAH 15,000 thousand (EUR 1,966 thousand) are outstanding. The bonds mature on 24 June 2009 and pay fixed interest at 8%.


48

Bank loans are secured as follows:


30 June 2008

31

December 2007

30 June 2007

(unaudited) (audited) (unaudited) Fixed assets 327,886 355,176 159,421 Biological assets 69 1,207 26,819 Inventories 187,134 213,134 93,887

515,089 569,517 280,127


30 June 2008

31

December 2007

30 June 2007

(unaudited) (audited) (unaudited) Fixed assets 42,986 47,871 23,454 Biological assets 9 163 3,945 Inventories 24,533 28,726 13,812

67,528 76,760 41,211


49

The terms and repayment schedule for loans and borrowings are as follows:

30 June 2008 (unaudited) 31 December 2007 (audited) 30 June 2007 (unaudited)


Interest type

Effective interest

rate

Nominal interest

rate

Less than one year

From one to

two years

More than two

years Total

Less than one year

From one to

two years

More than two

years Total

Less than one year

From one to

two years

More than two

years Total Loans from local banks

received in UAH Fixed 15.0% 15.0% 109,183 6,323 1,549 117,055

128,676 6,471 4,570 139,717 - - - - Loans from local banks

received in UAH Fixed 15.5% 15.5% 175 - - 175 480 - - 480 3,206 342 12,886 16,434 Loans from local banks

received in UAH Fixed 16.0% 16.0% 1,000 - - 1,000 - - - - 160,750 2,944 5,892 169,586 Loans from local banks

received in UAH Fixed 17.0% 17.0% 337 141 19 497 418 93 76 587 498 - 244 742 Loans from local banks

received in UAH Fixed 18.0% 18.0% 200 - - 200 181 121 - 302 1,084 - 4,378 5,462 Loans from local banks

received in UAH Fixed 19.0% 19.0% 211 110 - 321 717 105 5 827 95 - - 95 Loans from local banks

received in UAH Fixed 20.0% 20.0% 12 - - 12 109 - - 109 379 - 27 406 Loans from local banks

received in UAH Fixed 36.0% 36.0% 235 - - 235 - - - - - - - - Loans from local banks

received in Euro Floating 10.4% Euribor+

6.0% 953 - - 953 2,777 - - 2,777 - - - - Loans from local banks

received in Euro Fixed 7.0% 7.0% - - - - - - - - - 3,267 - 3,267 Loans from local banks

received in USD Fixed 10.0% 10.0% 74,388 915 - 75,303 50,511 4,148 - 54,659 - - - - Loans from local banks

received in USD Fixed 10.5% 10.5% 3,710 4,130 8,254 16,094 4,300 4,300 10,749 19,349 - - 11,347 11,347 Loans from non-resident

banks received in USD Floating 4.4% Libor + 1.25 % 4,568 5,160 15,481 25,209 - - - - - - - -

Loans from non-resident banks received in USD Floating 5.5%

Libor+ 2.4% 118,140 - - 118,140 126,250 - - 126,250 - - - -


Libor+ 3.5% 70,848 - - 70,848 - - - - - - - -


50

The terms and repayment schedule for loans and borrowings, continued:



Interest type

Effective interest

rate

Nominal interest

rate

Less than one year

From one to

two years

More than two

years Total

Less than one year

From one to

two years

More than two

years Total

Less than one year

From one to

two years

More than two

years Total Other long-term borrowings

received from a local non-financial institutions in UAH Fixed 16.0% 0.0% - - - - - - - - - 1,622 - 1,622

Other short-term borrowings received from a local non-financial institution in UAH Fixed 15.0% 0.0% 3,600 - - 3,600 3,900 - - 3,900 - - - -

Other short-term borrowings received from a local non-financial institutions in UAH Fixed 18.0% 0.0% - - - - - - - - 2,600 - - 2,600

Interest-bearing vendor financing аrrangements in USD Fixed 10.5% 10.5% 2,068 1,655 2,896 6,619 2,897 1,655 3,724 8,276 2,438 1,655 4,187 8,280

Finance lease liabilities Fixed 14.0-

16.0% 14.0-

16.0% 3,930 5,605 11,486 21,021 2,362 2,316 3,564 8,242 1,070 1,147 1,407 3,624 Bonds payable Fixed 15.0% 15.0% 15,000 - - 15,000 15,000 - - 15,000 - - - - Bonds payable Fixed 15.0% 8.0% 25,900 - - 25,900 - - - - - - - - Bonds payable Fixed 16.0% 8.0% - - - - - - - - - 14,272 16,679 30,951

434,458 24,039 39,685 498,182 338,578 19,209 22,688 380,475 172,120 25,249 57,047 254,416


51

The terms and repayment schedule for loans and borrowings are as follows:



type

Effective interest

rate

Nominal interest

rate

Less than one year

From one to

two years

More than two

years Total

Less than one year

From one to

two years

More than two

years Total

Less than one year

From one to

two years

More than two

years Total Loans from local banks

received in UAH Fixed 15.0% 15.0% 14,315 830 204 15,349

17,343 872 616 18,831 - - - - Loans from local banks

received in UAH Fixed 15.5% 15.5% 23 - - 23 65 - - 65 472 50 1,896 2,418 Loans from local banks

received in UAH Fixed 16.0% 16.0% 131 - - 131 - - - - 23,649 433 867 24,949 Loans from local banks

received in UAH Fixed 17.0% 17.0% 44 18 2 64 56 13 10 79 73 - 36 109 Loans from local banks

received in UAH Fixed 18.0% 18.0% 26 - - 26 24 16 - 40 159 - 644 803 Loans from local banks

received in UAH Fixed 19.0% 19.0% 29 14 - 43 97 14 1 112 14 - - 14 Loans from local banks

received in UAH Fixed 20.0% 20.0% 2 - - 2 15 - - 15 56 - 4 60 Loans from local banks

received in UAH Fixed 36.0% 36.0% 31 - - 31 - - - - - - - - Loans from local banks

received in Euro Floating 10.4% Euribor+

6.0% 125 - - 125 374 - - 374 - - - - Loans from local banks

received in Euro Fixed 7.0% 7.0% - - - - - - - - - 481 - 481 Loans from local banks

received in USD Fixed 10.0% 10.0% 9,753 120 - 9,873 6,808 559 - 7,367 - - - - Loans from local banks

received in USD Fixed 10.5% 10.5% 486 541 1,082 2,109 580 580 1,449 2,609 - - 1,669 1,669 Loans from non-resident

banks received in USD Floating 4.4% Libor + 1.25 % 598 676 2,030 3,304 - - - - - - - -


Libor+ 2.4% 15,488 - - 15,488 17,016 - - 17,016 - - - -


Libor+ 3.5% 9,287 - - 9,287 - - - - - - - -


52

The terms and repayment schedule for loans and borrowings, continued: 30 June 2008 (unaudited) 31 December 2007 (audited) 30 June 2007 (unaudited)


type

Effective interest

rate

Nominal interest

rate

Less than one year

From one to

two years

More than two

years Total

Less than one year

From one to

two years

More than two

years Total

Less than one year

From one to

two years

More than two

years Total Other long-term borrowings

received from a local non-financial institutions in UAH Fixed 16.0% 0.0% - - - - - - - - - 239 - 239

Other short-term borrowings received from a local non-financial institution in UAH Fixed 15.0% 0.0% 472 - - 472 526 - - 526 - - - -

Other short-term borrowings received from a local non-financial institutions in UAH Fixed 18.0% 0.0% - - - - - - - - 383 - - 383

Interest-bearing vendor financing аrrangements in USD Fixed 10.5% 10.5% 271 217 380 868 390 223 502 1,115 359 243 616 1,218

Finance lease liabilities Fixed 14.0-

16.0% 14.0-

16.0% 515 735 1,506 2,756 318 312 480 1,110 157 169 207 533 Bonds payable Fixed 15.0% 15.0% 1,966 - - 1,966 2,022 - - 2,022 - - - - Bonds payable Fixed 15.0% 8.0% 3,395 - - 3,395 - - - - - - - - Bonds payable Fixed 16.0% 8.0% - - - - - - - - - 2,100 2,453 4,553

56,957 3,151 5,204 65,312 45,634 2,589 3,058 51,281 25,322 3,715 8,392 37,429


53

16 OTHER LIABILITIES AND ACCOUNTS PAYABLE

Other accounts payable are as follows:


2008

31 December

2007 30 June

2007 (unaudited) (audited) (unaudited) Payables for land and fixed assets under lease 10,762 2,758 12,921 Salaries payable 8,626 5,745 6,326 Advances from customers 7,976 9,588 8,705 Payables for acquired companies 5,647 1,600 - Accrual for unused vacations 5,434 4,442 3,201 Accounts payable to government 4,640 6,602 2,654 Deferred government subsidy 4,073 3,142 516 VAT settlements 3,583 2,158 1,267 Social insurance payable 3,391 2,359 1,835 Payables for property, plant and equipment 2,873 2,664 2,852 Interest payable 818 1,749 1,356 Other payables 15,844 6,371 3,327

73,667 49,178 44,960


2008

31 December

2007 30 June

2007 (unaudited) (audited) (unaudited) Payables for land and fixed assets under lease 1,411 372 1,901 Salaries payable 1,131 774 931 Advances from customers 1,046 1,292 1,281 Payables for acquired companies 740 216 - Accrual for unused vacations 712 599 471 Accounts payable to government 608 890 390 Deferred government subsidy 534 423 76 VAT settlements 470 291 186 Social insurance payable 445 318 270 Payables for property, plant and equipment 377 359 419 Interest payable 107 236 199 Other payables 2,078 858 490

9,659 6,628 6,614


54

17 PROVISIONS FOR IMPAIRMENT OF TRADE AND OTHER ACCOUNTS RECEIVABLE

Provisions for impairment of trade and other accounts receivable are as follows:


30 June

2008

31 December

2007 30 June

2007 (unaudited) (audited) (unaudited) Trade accounts receivable (note 11) 7,783 8,239 4,385 Other accounts receivable (note 12) 3,700 3,967 4,005

11,483 12,206 8,390


2008

31 December

2007 30 June

2007 (unaudited) (audited) (unaudited) Trade accounts receivable (note 11) 1,020 1,110 645 Other accounts receivable (note 12) 485 535 589

1,505 1,645 1,234

Changes in provisions for impairment of trade and other accounts receivable during the six months ended 30 June are as follows:


hryvnias) (in thousands of Euros) 2008 2007 2008 2007 Balance at 1 January 12,206 7,355 1,645 1,106 Charge in income statement (note 23) 1,548 1,035 202 154 Amounts written off (2,271) - (298) - Currency translation difference - - (44) (26)

Balance as at 30 June 11,483 8,390 1,505 1,234


55

18 REVENUES

Revenues for the six months ended 30 June are as follows:

(in thousands of Ukrainian hryvnias) (in thousands of Euros)

2008 2007 2008 2007 (unaudited) (unaudited) (unaudited) (unaudited) Sugar and related sales:

Sugar 197,075 130,661 25,718 19,464 Molasses 16,393 7,950 2,139 1,184 Pulp 5,388 3,315 703 494 Other sugar related sales 19,154 9,770 2,499 1,455

238,010 151,696 31,059 22,597

Crops 51,559 23,369 6,728 3,481 Cattle farming 36,705 23,323 4,790 3,474 Other sales 326 1,815 43 271

88,590 48,507 11,561 7,226

326,600 200,203 42,620 29,823

For the six months ended 30 June 2008 revenues totaling UAH 3,939 thousand (EUR 514 thousand) were settled through barter transactions, which do not result in a net cash inflow from operations (2007: UAH 3,197 thousand, EUR 476 thousand).

More than 90% of revenue is generated from sales to customers in Ukraine.

19 COST OF REVENUES

Cost of revenues for the six months ended 30 June by product is as follows:


hryvnias) (in thousands of Euros)

2008 2007 2008 2007 (unaudited) (unaudited) (unaudited) (unaudited) Sugar and related sales:

Sugar 168,335 117,003 21,954 17,429 Molasses 6,335 4,469 826 666 Pulp 2,603 2,929 339 436 Other sugar related sales 1,039 5,804 135 864

178,312 130,205 23,254 19,395

Crops 24,378 16,567 3,179 2,468 Cattle farming 27,009 20,354 3,522 3,032 Other sales 308 2,033 42 303

51,695 38,954 6,743 5,803

230,007 169,159 29,997 25,198


56

20 OTHER OPERATING INCOME

Other operating income for the six months ended 30 June is as follows:



2008 2007 2008 2007 (unaudited) (unaudited) (unaudited) (unaudited) Government subsidies relating to: Cattle farming 8,635 3,911 1,123 583 VAT 4,930 2,975 641 443 Crop production 2,547 1,893 331 282 Interest and financing costs 2,486 255 323 38 Other operating income 3,138 3,158 409 471

21,736 12,192 2,827 1,817

21 GENERAL AND ADMINISTRATIVE EXPENSE

General and administrative expense for the six months ended 30 June is as follows:



2008 2007 2008 2007 (unaudited) (unaudited) (unaudited) (unaudited) Salary and related charges 15,618 11,024 2,037 1,642 Professional services 4,817 1,334 628 199 Depreciation 3,030 2,477 395 369 Fuel and other materials 2,624 1,332 342 198 Taxes other than corporate income tax 1,406 854 183 127 Insurance 1,356 286 177 43 Maintenance 1,177 345 154 51 Communication 1,139 744 149 111 Office expenses 795 538 104 80 Transportation 690 439 90 65 Rent 328 137 43 20 Other services 2,593 684 338 102 Other general and administrative expense 1,598 1,209 208 181

37,171 21,403 4,848 3,188


57

22 SELLING AND DISTRIBUTION EXPENSE

Selling and distribution expense for the six months ended 30 June is as follows:



2008 2007 2008 2007 (unaudited) (unaudited) (unaudited) (unaudited) Transportation 8,169 2,444 1,067 364 Salary and related charges 1,868 1,891 244 282 Commissions 1,699 700 222 104 Impairment provision on trade and other accounts receivable (note 17) 1,548 1,035 202 154

Professional services 562 498 73 74 Fuel and other materials 413 444 54 66 Depreciation 237 88 31 13 Advertising 209 98 27 15 Other services 2,086 450 272 68 Other selling and distribution expense 1,046 1,129 138 169

17,837 8,777 2,330 1,309

23 OTHER OPERATING EXPENSE

Other operating expense for the six months ended 30 June is as follows:



2008 2007 2008 2007 (unaudited) (unaudited) (unaudited) (unaudited) Charity 1,223 565 160 84 Social expenses 1,126 366 147 55 Canteen expenses 946 644 123 96 Penalties paid 919 619 120 92 Other salary and related charges 575 336 75 50 Depreciation 562 275 73 41 VAT written off 343 385 45 57 Representative expenses 315 46 41 7 Fixed asset impairement 212 394 28 59 Inventory written off 146 776 19 116 Other operating expenses 1,101 440 144 66

7,468 4,846 975 723


58

24 CHANGES IN FAIR VALUE OF BIOLOGICAL ASSETS

Changes in fair value of biological assets for the six months ended 30 June is as follows:


hryvnias) (in thousands of Euros) 2008 2007 2008 2007 (unaudited) (unaudited) (unaudited) (unaudited) (restated) (restated) Non-current livestock (8,192) 7,874 (1,067) 1,145 Current livestock (6,111) 11,155 (796) 1,605 Crops 104,110 56,247 13,558 8,379

89,807 75,276 11,695 11,129

The increase in biological assets is mainly due to significantly expanded agricultural operations and increases in market prices for crops.

25 NET FINANCIAL EXPENSE

Net financial expense for the six months ended 30 June is as follows:



2008 2007 2008 2007 (unaudited) (unaudited) (unaudited) (unaudited) Interest expense: Bank loans 19,147 16,318 2,518 2,430 Bonds payable 2,224 2,455 292 366 Interest-bearing vendor financing аrrangements 343 214 45 32 Finance lease liabilities 1,043 50 137 8

22,757 19,037 2,992 2,836

Foreign currency exchange (income) loss (15,661) 129 (2,057) 19 (Income) loss from promissory note

transactions (2,984) 7,059 (392) 1,052 Interest income: Bonds receivable (1,163) (305) (152) (45) Cash balances (146) (85) (19) (13)

(1,309) (390) (171) (58)

Other financial expense 1,883 449 264 66

4,686 26,284 636 3,915


59

26 OTHER INCOME

Other income for the six months ended 30 June 2008 and 2007 consists mainly of gains on the disposal of fixed assets .

27 INCOME TAX EXPENSE Certain companies in the Group are subject to income taxes. Income tax expense for these companies for the six months ended 30 June is as follows:


hryvnias) (in thousands of Euros) 2008 2007 2008 2007 (unaudited) (unaudited) (unaudited) (unaudited) Current expense (403) (524) (52) (78) Deferred expense (3,255) (205) (419) (31)

(3,658) (729) (471) (109)

The corporate income tax rate is 25% in 2008 and 2007. Amount of FAT expense for the six months ended 30 June 2008 is UAH 179 thousand (EUR 23 thousand) (2007: UAH 136 thousand; EUR 20 thousand) and is included in cost of revenues.

28 SEGMENT REPORTING

A business segment is a group of assets and operations engaged in providing products or services that are subject to risks and returns that are different from those of other business segments.

At 30 June 2008, the group is organized into three main business segments:

• production and wholesale distribution of sugar • growing and selling grain and oilseeds crops (agriculture), and • dairy cattle farming.

Other group operations mainly comprise the production and sales of canned goods and fodder. Neither of these constitutes a separately reportable segment.

Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision-maker. The chief operating decision-maker that makes strategic decisions is the management board.

Revenues from external customers are derived primarily from the sales of sugar, crops and cattle farming products and are measured in a manner consistent with that in the income statement.

Revenues of UAH 73,386 thousand (EUR 9,577 thousand) during the six months ended 30 June 2008 and 57,230 UAH thousand (EUR 8,525 thousand) during the six months ended 30 June 2007 are derived from two external customers and are attributable to the sugar production segment.

The amounts provided to the Board of Directors with respect of total assets are measured in a manner consistent with that of the financial statements. These assets are allocated based on the operations of the segment and the physical location of the asset. Investments classified as available-for-sale financial assets are not considered to be segment assets. The amounts of total liabilities are measured in a manner consistent with that of the financial statements. Liabilities are allocated based on the operations of the segment. Interest-bearing liabilities are not considered to be segment liabilities.


60

The segment information for the six months ended 30 June 2008 is as follows:

(in thousands of Ukrainian hryvnias) Sugar

production Agriculture Cattle

farming Other

businesses Unallocated Total Total revenues 238,010 66,753 36,705 326 - 341,794 Inter-segment revenue - 15,194 - - - 15,194

Revenue from external customers 238,010 51,559 36,705 326 - 326,600 Total cost of revenues (178,312) (39,572) (27,009) (308) - (245,201) Inter-segment cost of revenues - (15,194) - - - (15,194)

Cost of revenues (178,312) (24,378) (27,009) (308) - (230,007) Loss from remeasurement of agricultural produce to fair value - (15,186) - - - (15,186)

Gross profit 59,698 11,995 9,696 18 - 81,407

General and administrative expense (7,915) (10,538) (7,502) (330) (10,886) (37,171) Selling and distribution expense (7,842) (2,515) - (729) (6,751) (17,837) Other operating income (expense) 710 110,618 (5,017) 5 (2,241) 104,075

Profit (loss) before interest and taxation 44,651 109,560 (2,823) (1,036) (19,878) 130,474

Gain from exchange differences - - - - 15,661 15,661 Interest expense - - - - (22,757) (22,757) Interest income - - - - 1,309 1,309 Other income - - - - 1,756 1,756 Gain on acquisition of subsidiaries - - - - 18,917 18,917

Profit (loss) before tax 44,651 109,560 (2,823) (1,036) (4,992) 145,360 Taxation - - - - (3,658) (3,658)

Net profit (loss) 44,651 109,560 (2,823) (1,036) (8,650) 141,702

Total assets 465,495 933,589 158,079 59,751 40,491 1,657,405 Unallocated deferred tax assets - - - - 477 477

Consolidated total assets 465,495 933,589 158,079 59,751 40,968 1,657,882

Total liabilities 47,723 - - 3,290 687,752 738,765 Unallocated deferred tax liabilities - - - - 49,459 49,459

Consolidated total liabilities 47,723 - - 3,290 737,211 788,224

Other segment information: Depreciation and amortisation 12,267 15,568 834 802 318 29,789 Additions to non-current assets: Property, plant and equipment 23,192 120,745 2,848 184 505 147,474 Intangible assets 9 7 - 10 24 50 Biological non-current assets - - 1,467 - - 1,467


61

(in thousands of Euros) Sugar


farming Other



Cost of revenues (23,254) (3,179) (3,522) (42) - (29,997) Loss from remeasurement of agricultural produce to fair value - (1,999) - - - (1,999)

Gross profit 7,805 1,550 1,268 1 - 10,624

General and administrative expense (1,032) (1,374) (978) (43) (1,421) (4,848) Selling and distribution expense (1,024) (329) - (95) (882) (2,330) Other operating income (expense) 92 14,402 (653) 1 (295) 13,547

Profit (loss) before interest and taxation 5,841 14,249 (363) (136) (2,598) 16,993

Gain from exchange differences - - - - 2,057 2,057 Interest expense - - - - (2,992) (2,992) Interest income - - - - 171 171 Other income - - - - 214 214 Gain on acquisition of subsidiaries - - - - 2,443 2,443

Profit (loss) before tax 5,841 14,249 (363) (136) (705) 18,886 Taxation - - - - (471) (471)

Net profit (loss) 5,841 14,249 (363) (136) (1,176) 18,415

Total assets 61,026 122,393 20,724 7,833 5,312 217,288 Unallocated deferred tax assets - - - - 63 63

Consolidated total assets 61,026 122,393 20,724 7,833 5,375 217,351

Total liabilities 6,256 - - 431 90,167 96,854 Unallocated deferred tax liabilities - - - - 6,484 6,484

Consolidated total liabilities 6,256 - - 431 96,651 103,338

Other segment information: Depreciation and amortisation 1,602 2,033 109 104 43 3,891 Additions to non-current assets: Property, plant and equipment 3,031 15,737 370 24 66 19,228 Intangible assets 1 1 - 1 3 6 Biological non-current assets - - 190 - - 190


62

The segment information for the six months ended 30 June 2007 is as follows:

(in thousands of Ukrainian hryvnias) Sugar


farming Other

businesses Unallocated Total Total revenues 151,696 36,969 23,323 1,815 - 213,803 Inter-segment revenue - 13,600 - - - 13,600

Revenue from external customers 151,696 23,369 23,323 1,815 - 200,203 Total cost of revenues (130,205) (30,167) (20,354) (2,033) - (182,759) Inter-segment cost of revenues - (13,600) - - - (13,600)

Cost of revenues (130,205) (16,567) (20,354) (2,033) - (169,159) Loss from remeasurement of agricultural produce to fair value - (451) - - - (451)

Gross profit 21,491 6,351 2,969 (218) - 30,593

General and administrative expense (6,024) (4,501) (4,492) (672) (5,714) (21,403) Selling and distribution expense (3,861) (504) - (1,023) (3,389) (8,777) Other operating income (expense) (270) 60,393 23,946 73 (1,519) 82,623

Profit (loss) before interest and taxation 11,336 61,739 22,423 (1,840) (10,622) 83,036

Loss from exchange differences - - - - (129) (129) Interest expense - - - - (19,037) (19,037) Interest income - - - - 390 390 Other expense - - - - (6,672) (6,672) Gain on acquisition of subsidiaries - - - - 704 704

Profit (loss) before tax 11,336 61,739 22,423 (1,840) (35,367) 58,291 Taxation - - - - (729) (729)

Net profit (loss) 11,336 61,739 22,423 (1,840) (36,096) 57,562

Total assets 336,374 409,028 88,962 22,338 25,500 882,202 Unallocated deferred tax assets - - - - 1,293 1,293


Total liabilities 39,532 - - 1,954 369,350 410,836 Unallocated deferred tax liabilities - - - - 6,379 6,379

Consolidated total liabilities 39,532 - - 1,954 375,729 417,215

Other segment information: Depreciation and amortisation 6,439 9,996 334 474 175 17,418 Additions to non-current assets: Property, plant and equipment 18,421 39,396 751 1,447 312 60,327 Intangible assets 102 115 - - 11 228 Biological non-current assets - - 3 - - 3


63

(in thousands of Euros) Sugar


farming Other



Cost of revenues (19,395) (2,468) (3,032) (303) - (25,198) Loss from remeasurement of agricultural produce to fair value - (67) - - - (67)

Gross profit 3,202 946 442 (32) - 4,558

General and administrative expense (897) (670) (669) (100) (852) (3,188) Selling and distribution expense (576) (75) - (152) (506) (1,309) Other operating income (expense) (40) 8,934 3,545 11 (227) 12,223

Profit (loss) before interest and taxation 1,689 9,135 3,318 (273) (1,585) 12,284

Loss from exchange differences - - - - (19) (19) Interest expense - - - - (2,836) (2,836) Interest income - - - - 58 58 Other expense - - - - (993) (993) Gain on acquisition of subsidiaries - - - - 105 105

Profit (loss) before tax 1,689 9,135 3,318 (273) (5,270) 8,599 Taxation - - - - (109) (109)

Net profit (loss) 1,689 9,135 3,318 (273) (5,379) 8,490

Total assets 49,486 60,176 13,088 3,286 3,752 129,788 Unallocated deferred tax assets - - - - 190 190


Total liabilities 5,816 - - 287 54,338 60,441 Unallocated deferred tax liabilities - - - - 938 938

Consolidated total liabilities 5,816 - - 287 55,276 61,379

Other segment information: Depreciation and amortisation 959 1,489 50 71 26 2,595 Additions to non-current assets: Property, plant and equipment 2,744 5,868 112 216 46 8,986 Intangible assets 15 17 - - 2 34 Biological non-current assets - - - - - -


64

29 CREDIT QUALITY OF FINANCIAL ASSETS The credit quality of financial assets that are neither past due nor impaired can be assessed by reference to external credit ratings (if available) or to historical information about counterparty default rates:


2008

31 December

2007 30 June

2007 (unaudited) (audited) (unaudited) Trade receivables neither past due nor impaired Counterparties with external credit rating (Standard & Poor's) A-/Stable/A-2 1,947 2,768 189 BB-/Stable/ - - 126 Counterparties without external credit rating - Group A 8,216 17,258 11,843 Past due trade receivables 73,697 40,002 89,717

83,860 60,028 101,875


2008

31 December

2007 30 June

2007 (unaudited) (audited) (unaudited) Trade receivables neither past due nor impaired Counterparties with external credit rating (Standard & Poor's) A-/Stable/A-2 255 - 28 BB-/Stable/ - 373 19 Counterparties without external credit rating - Group A 1,078 2,326 1,742 Past due trade receivables 9,661 5,392 13,199

10,994 8,091 14,988

Group A represents existing customers (more than one year) with no defaults in the past.

Trade receivables that are less than one month past due are not considered impaired. As at 30 June 2008 trade receivables of UAH 45,452 thousand (30 June 2007: UAH 10,001 thousand) or EUR 5,959 thousand (30 June 2007: EUR 1,471 thousand) are past due but not impaired. These relate to a number of existing customers for whom there is no recent history of credit problems and where management believes collection is probable.


65


2008

31 December

2007 30 June

2007 (unaudited) (audited) (unaudited) Cash and cash equivalents Banks with external credit rating (Moody's) Aaa3/Negative 8,263 - - Ваа1/Stable 5,106 4,406 2,518 Ва2/Stable 150 30 16 В2/Stable 464 353 341

Banks without external credit rating Group A 345 480 297 Group B 8,845 2,578 2,082

Cash on hand 124 79 67

23,297 7,926 5,321


2008

31 December

2007 30 June

2007 (unaudited) (audited) (unaudited) Cash and cash equivalents Banks with external credit rating (Moody's) Aaa3/Negative 1,083 - - Ваа1/Stable 669 594 370 Ва2/Stable 20 4 2 В2/Stable 61 48 50

Banks without external credit rating Group A 46 65 44 Group B 1,159 347 307

Cash on hand 16 10 10

3,054 1,068 783

Group A represents Ukrainian banks. Group B represents other foreign banks.

No external ratings in respect of financial instruments held-to-maturity, investments available-for-sale and other accounts receivable are available.


66

30 FINANCIAL RISK MANAGEMENT

(a) Overview

The Group has exposure to the following risks from its use of financial instruments: • credit risk • liquidity risk • market risk.

This note presents information about exposure to each of these risks and the Group’s objectives, policies and processes for measuring and managing risk. Further quantitative disclosures are included throughout these interim condensed consolidated financial statements.

The Board of Directors has overall responsibility for the establishment and oversight of the risk management framework.

The risk management policies are established to identify and analyze the risks faced by the Group, to set appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions and the Group’s activities. The Group, through its training and management standards and procedures, aims to develop a disciplined and constructive control environment in which all employees understand their roles and obligations.

The Audit Committee oversees how management monitors compliance with risk management policies and procedures and reviews the adequacy of the risk management framework in relation to the risks. The Audit Committee is assisted in its oversight role by Internal Audit. Internal Audit undertakes both regular and ad hoc reviews of risk management controls and procedures, the results of which are reported to the Audit Committee.

(b) Credit risk

Credit risk is the risk of financial loss if a customer or counterparty to a financial instrument fails to meet its contractual obligations. Credit risk is managed on a Group basis. Credit risk arises from cash and cash equivalents, non-derivative financial instruments and receivables from customers.

The carrying amount of financial assets represents the maximum credit exposure. The maximum exposure to credit risk is as follows:


2008

31 December

2007 30 June

2007 (unaudited) (audited) (unaudited) Bonds receivable held-to- maturity - 4,287 3,451 Investments held-to- maturity 2,071 700 700 Investments 2,597 1,795 172 Trade accounts receivable 83,860 60,028 101,875 Other accounts receivable and prepayments 100,601 75,509 66,874 Promissory notes available-for-sale 2,689 5,632 3,127 Cash and cash equivalents 23,297 7,926 5,321

215,115 155,877 181,520


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2008

31 December

2007 30 June

2007 (unaudited) (audited) (unaudited) Bonds receivable held-to- maturity - 578 508 Investments held-to- maturity 272 94 103 Investments 341 242 25 Trade accounts receivable 10,994 8,091 14,988 Other accounts receivable and prepayments 13,189 10,176 9,839 Promissory notes available-for-sale 353 759 460 Cash and cash equivalents 3,054 1,068 783

28,203 21,008 26,706

(c) Trade accounts receivable

The exposure to credit risk is influenced mainly by the individual characteristics of each customer. The demographics of the Group’s customer base, including the default risk of the industry and country in which customers operate, has less of an influence on credit risk.

Management established a credit policy under which each new customer is analyzed individually for creditworthiness before standard payment and delivery terms and conditions are offered. The review includes external ratings, where available, and in some cases bank references.

More than 60 percent of customers have been transacting with the Group for over three years, and no losses are expected from non-performance by these counterparties. In monitoring customer credit risk, customers are grouped according to their credit characteristics, including whether they are an individual or legal entity, whether they are a wholesale, retail or end-user customer, geographic location, industry, aging profile, maturity and existence of previous financial difficulties. Trade and other receivables relate mainly to wholesale customers. Customers that are graded as “high risk” are placed on a restricted customer list, and future sales are made on a prepayment basis with approval of management. The balance of the twelve major debtors is as follows:


2008

31 December

2007 30 June

2007 (unaudited) (audited) (unaudited) Debtors with external credit rating (Standard & Poor's) A+/Stable/A-1 20,286 - - A-/Stable/A-2 2,241 2,768 -

Debtors without external credit rating - Group A 46,554 39,112 81,739

69,081 41,880 81,739


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2008

31 December

2007 30 June

2007 (unaudited) (audited) (unaudited) Debtors with external credit rating (Standard & Poor's) A+/Stable/A-1 2,659 - - A-/Stable/A-2 294 373 -

Debtors without external credit rating - Group A 6,103 5,272 12,025

9,056 5,645 12,025

Group A represents existing customers (more than one year) for whom there is no recent history of defaults.

The Group does not require collateral in respect of trade and other receivables. Management establishes an allowance for impairment that represents its estimate of incurred losses in respect of trade and other receivables and investments. The main components of this allowance are a specific loss component that relates to individually significant exposures, and a collective loss component established for groups of similar assets in respect of losses that have been incurred but not yet identified. The collective loss allowance is determined based on historical data of payment statistics for similar financial assets.

(d) Liquidity risk

Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the Group’s reputation.

Typically the Group ensures that it has sufficient cash on demand to meet expected operational expenses for a period of 60 days, including the servicing of financial obligations; this excludes the potential impact of extreme circumstances that cannot reasonably be predicted, such as natural disasters.

The table below analyses non-derivative financial liabilities, excluding interest payments, and excluding the impact of netting agreements into relevant maturity groupings based on the remaining period at the balance sheet to the contractual maturity date. Balances due within twelve months equal their carrying balances as the impact of discounting is not significant.

30 June 2008 Carrying amount

Contractual cash flows

Less than one year

From one to two years

More than two years

(in thousands of Ukrainian hryvnias) Bank loans 426,042 426,042 383,960 16,779 25,303 Short-term borrowings from non-financial institutions 3,600 3,600 3,600 - - Finance lease liabilities 21,021 21,021 3,930 5,605 11,486 Interest-bearing vendor financing аrrangements 6,619 6,619 2,068 1,655 2,896 Bonds payable 40,900 40,900 40,900 - - Trade accounts payable and other liabilities and accounts payable 188,304 188,304 188,304 - -

686,486 686,486 622,762 24,039 39,685


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Less than one year


More than two years

(in thousands of Euros) Bank loans 55,855 55,855 50,338 2,199 3,318 Short-term borrowings from non-financial institutions 472 472 472 - - Finance lease liabilities 2,756 2,756 515 735 1,506 Interest-bearing vendor financing аrrangements 868 868 271 217 380 Bonds payable 5,361 5,361 5,361 - - Trade accounts payable and other liabilities and accounts payable 24,688 24,688 24,688 - -

90,000 90,000 81,645 3,151 5,204

31 December 2007 Carrying amount


Less than one year


More than two years

(in thousands of Ukrainian hryvnias) Bank loans 345,057 345,057 314,419 15,238 15,400 Borrowings from non-financial institutions 3,900 3,900 3,900 - - Finance lease liabilities 8,242 8,242 2,362 2,316 3,564 Interest-bearing vendor financing аrrangements 8,276 8,276 2,897 1,655 3,724 Bonds payable 15,000 15,000 15,000 - - Trade accounts payable and other liabilities and accounts payable 89,654 89,654 89,654 - -

470,129 470,129 428,232 19,209 22,688

31 December 2007 Carrying amount


Less than one year


More than two years

(in thousands of Euros) Bank loans 46,508 46,508 42,378 2,054 2,076 Borrowings from non-financial institutions 526 526 526 - - Finance lease liabilities 1,110 1,110 318 312 480 Interest-bearing vendor financing аrrangements 1,115 1,115 390 223 502 Bonds payable 2,022 2,022 2,022 - - Trade accounts payable and other liabilities and accounts payable 12,083 12,083 12,083 - -

63,364 63,364 57,717 2,589 3,058


70



Less than one year


More than two years

(in thousands of Ukrainian hryvnias) Bank loans 207,339 207,339 166,012 6,553 34,774 Borrowings from non-financial institutions 4,222 4,222 2,600 1,622 - Finance lease liabilities 3,624 3,624 1,070 1,147 1,407 Interest-bearing vendor financing аrrangements 8,280 8,280 2,438 1,655 4,187 Bonds payable 30,951 30,951 - 14,272 16,679 Trade accounts payable and other liabilities and accounts payable 131,295 131,295 131,295 - -

385,711 385,711 303,415 25,249 57,047



Less than one year


More than two years

(in thousands of Euros) Bank loans 30,503 30,503 24,423 964 5,116 Borrowings from non-financial institutions 622 622 383 239 - Finance lease liabilities 533 533 157 169 207 Interest-bearing vendor financing аrrangements 1,218 1,218 359 243 616 Bonds payable 4,553 4,553 - 2,100 2,453 Trade accounts payable and other liabilities and accounts payable 19,315 19,315 19,315 - -

56,744 56,744 44,637 3,715 8,392

(e) Market risk

Market risk is the risk that changes in market prices, such as foreign exchange rates, interest rates and equity prices will affect income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters, while optimizing the return on risk. All such transactions are carried out within the guidelines set by management.

Currency risk

The Group is exposed to currency risk on sales, purchases and borrowings that are denominated in a currency other than the respective functional currencies of Group entities, which is primarily the Ukrainian hryvnia.

In respect of monetary assets and liabilities denominated in foreign currencies, the Group ensures that its net exposure is kept to an acceptable level by buying or selling foreign currencies at spot rates when necessary to address short-term imbalances.


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The exposure to foreign currency risk is as follows:

(in thousands of Ukrainian hryvnias) 30 June 2008 31 December 2007 30 June 2007 EUR USD EUR USD EUR USD (unaudited) (audited) (unaudited) Trade accounts receivable - 3,235 - 1,452 - 3,279 Other accounts receivable 3,460 - 356 2,422 6,562 487 Cash and cash equivalents 8,844 - 2,578 - 2,082 - Bank loans (953) (305,594) (2,777) (200,258) (3,267) (11,347) Interest-bearing vendor financing arrangements - (6,619)

- (8,276) - (8,280)

Trade accounts payable (61) (6,672) (17) (8,627) - (12,329) Other liabilities and accounts payable (590) (11,587) (2,003) (5,702) (1,346) (214)

Net long (short) position 10,700 (327,237) (1,863) (218,989) 4,031 (28,404)

(in thousands of Euros) 30 June 2008 31 December 2007 30 June 2007 EUR USD EUR USD EUR USD (unaudited) (audited) (unaudited) Trade accounts receivable - 424 - 196 - 482 Other accounts receivable 454 - 48 326 965 72 Cash and cash equivalents 1,159 - 347 - 306 - Bank loans (125) (40,061) (374) (26,992) (481) (1,669) Interest-bearing vendor financing arrangements - (868)

- (1,115) - (1,218)

Trade accounts payable (8) (875) (2) (1,163) - (1,815) Other liabilities and accounts payable (77) (1,519) (270) (769) (198) (31)

Net long (short) position 1,403 (42,899) (251) (29,517) 592 (4,179)

A 10 percent strengthening of the Ukrainian hryvnia against the following currencies would have (decreased) increased pre-tax profit by the amounts shown below. This analysis assumes that all other variables, in particular interest rates, remain constant.

Effect in thousands of Ukrainian hryvnias

30 June

2008

31 December

2007 30 June

2007 (unaudited) (audited) (unaudited) EUR (1,070) 186 (403) USD 33,524 21,899 2,840

Effect in thousands of Euros EUR (140) 25 (59) USD 4,395 2,952 418

A 10 percent weakening of the Ukrainian hryvnia against the above currencies would have had the equal but opposite effect on the above currencies to the amounts shown above, on the basis that all other variables remain constant.


72

Interest rate risk

Changes in interest rates impact primarily borrowings by changing either their fair value (fixed rate debt) or future cash flows (variable rate debt). To minimize risks associated with interest rates, management obtains long-term loans primarily at fixed rates.

Interest rate profile of interest bearing financial instruments is as follows:


2008

31 December

2007 30 June

2007 (unaudited) (audited) (unaudited) Fixed rate instruments Financial assets - 4,287 3,451 Financial liabilities (283,032) (251,448) (254,416)

(283,032) (247,161) (250,965)

Variable rate instruments Financial liabilities (215,150) (129,027) -


2008

31 December

2007 30 June

2007 (unaudited) (audited) (unaudited) Fixed rate instruments Financial assets - 578 508 Financial liabilities (37,107) (33,891) (37,429)

(37,107) (33,313) (36,921)

Variable rate instruments Financial liabilities (28,204) (17,390) -

The Group does not account for any fixed rate financial assets and liabilities at fair value through profit or loss, and the Group does not designate derivatives (interest rate swaps) as hedging instruments under a fair value hedge accounting model. Therefore, a change in interest rates at the reporting date would not affect profit or loss.

With respect to variable rate instruments, a change of 100 basis points in interest rates over the reporting period would have increased (decreased) equity and net profit by UAH 465 thousand (Euro 60 thousand) provided all other variables are held constant.

Other market price risk

The Group does not enter into commodity contracts other than to meet expected usage and sale requirements; such contracts are not settled net. Equity investments are not listed on a stock exchange; therefore, it is not practicable to determine their sensitivity to market changes.

(f) Fair values

Estimated fair values of the financial assets and liabilities are determined using available market information and appropriate valuation methodologies. However, considerable judgment is required in interpreting market data to produce the estimated fair values. Accordingly, the estimates are not necessarily indicative of the amounts that could be realized in a current market exchange. The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair values.


73

The estimated fair values of financial assets and liabilities are determined using discounted cash flow and other appropriate valuation methodologies, at year-end, and are not indicative of the fair value of those instruments at the date these interim condensed consolidated financial statements are prepared or distributed. These estimates do not reflect any premium or discount that could result from offering for sale at one time the Group’s entire holdings of a particular financial instrument. Fair value estimates are based on judgments regarding future expected cash flows, current economic conditions, risk characteristics of various financial instruments and other factors.

Fair value estimates are based on existing financial instruments without attempting to estimate the value of anticipated future business and the value of assets and liabilities not considered financial instruments. In addition, tax ramifications related to the realization of the unrealized gains and losses can have an effect on fair value estimates and have not been considered.

As at 30 June 2008 and 31 December 2007, the carrying amount of financial assets and liabilities approximate their fair values due to the short-term nature and market rates at period end.

31 COMMITMENTS

(a) Social commitments

The Group makes contributions to mandatory and voluntary social programs. Social assets, as well as local social programs, benefit the community at large and are not normally restricted to employees. The Group transferred certain social operations and assets to local authorities; however, management expects that the Group will continue to fund these social programs through the foreseeable future. These costs are recorded in the year they are incurred.

(b) Operating leases

The Group leases property and equipment under operating leases. The leases typically run for an initial period of five to ten years, with an option to renew the lease after that date. Lease payments are usually increased annually to reflect market rentals. Future minimum lease payments under non-cancellable operating leases are as follows:


2008

31 December

2007 30 June

2007 (unaudited) (audited) (unaudited) Less than one year 30,038 20,339 15,338 From one to five years 75,523 38,346 31,857 More than five years 38,432 18,944 34,229

143,993 77,629 81,424


2008

31 December

2007 30 June

2007 (unaudited) (audited) (unaudited) Less than one year 3,938 2,741 2,257 From one to five years 9,901 5,168 4,687 More than five years 5,038 2,554 5,036

18,877 10,463 11,980


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(c) Financial leases

The future minimum lease payments payable under finance leases are as follows:


2008

31 December

2007 30 June

2007 (unaudited) (audited) (unaudited) Less than one year 6,449 3,425 1,532 From one to two years 7,441 3,046 1,439 More than two years 13,505 4,312 1,660

27,395 10,783 4,631

Future finance charges on finance leases (6,374) (2,541) (1,007)

Present value of finance lease liabilities 21,021 8,242 3,624

Less than one year 3,930 2,362 1,070 From one to two years 5,605 2,316 1,147 More than two years 11,486 3,564 1,407

21,021 8,242 3,624


2008

31 December

2007 30 June

2007 (unaudited) (audited) (unaudited) Less than one year 845 462 225 From one to two years 976 411 212 More than two years 1,770 580 244

3,591 1,453 681

Future finance charges on finance leases (835) (343) (148)

Present value of finance lease liabilities 2,756 1,110 533

Less than one year 515 318 157 From one to two years 735 312 169 More than two years 1,506 480 207

2,756 1,110 533


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(d) Contractual commitments

The Group has the following contractual commitments:


2008

31 December

2007 30 June

2007 (unaudited) (audited) (unaudited) Purchase commitments: Property, plant and equipment 46,071 56,236 55,305 Materials 18,107 5,936 1,048 Services 25 25 25

64,203 62,197 56,378

Sales commitments: Sugar and by-products 71,245 31,411 64,073


2008

31 December

2007 30 June

2007 (unaudited) (audited) (unaudited) Purchase commitments: Property, plant and equipment 6,040 7,580 8,136 Materials 2,374 800 154 Services 3 3 4

8,417 8,383 8,294

Sales commitments: Sugar and by-products 9,340 4,234 9,426


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32 RELATED PARTY TRANSACTIONS

The Group performs transactions with related parties in the ordinary course of business. Related parties comprise the Group parent’s associates, the shareholders, companies are under common control of the Group’s controlling owners, key management personnel and their close family members, and companies that are controlled or significantly influenced by shareholders. Prices for related party transactions are determined on an ongoing basis. The terms of some related party transactions may differ from market terms. Balances and transactions with related parties, substantially all of which are with companies under common control of the shareholders are shown at their carrying value and are as follows:

(a) Revenues

Sales of goods and services to related parties outside the consolidated Group for the six months ended 30 June are as follows:


hryvnias) (in thousands of Euros) 2008 2007 2008 2007 (unaudited) (unaudited) (unaudited) (unaudited) Revenues 5,289 7,264 691 1,082

(b) Purchases

Purchases of goods and services from related parties for the six months ended 30 June are as follows:


2008 2007 2008 2007 (unaudited) (unaudited) (unaudited) (unaudited) Purchases 2,491 4,849 325 722

(c) Receivables

Receivables from related parties as at 30 June are as follows:


2008 2007 2008 2007 (unaudited) (unaudited) (unaudited) (unaudited) Trade accounts receivable 1,427 8,270 186 1,217 Long-term receivables - 3,451 - 508 Advances made 180 1,673 24 246 Other receivables 317 5,470 41 805

1,924 18,864 251 2,776

There is no contractual maturity for the receivables from related parties. Balances are unsecured. No provision for doubtful debts is created on these balances as at 30 June 2008 and 31 December 2007.


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(d) Payables

Payables from related parties as at 30 June are as follows:


2008 2007 2008 2007 (unaudited) (unaudited) (unaudited) (unaudited) Trade accounts payable 244 20,719 32 3,048 Advances received - 4,173 - 614 Other payables 510 3,670 67 540

754 28,562 99 4,202

(e) Loans and borrowings

Loans and borrowings from related parties as at 30 June are as follows:


hryvnias) (in thousands of Euros) 2008 2007 2008 2007 (unaudited) (unaudited) (unaudited) (unaudited) Local banks - 1,622 - 239


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33 EVENTS SUBSEQUENT TO THE BALANCE SHEET DATE

• On 7 May 2008, the Group entered into a loan agreement with the European Bank for Reconstruction and Development (EBRD) with a credit limit of USD 20,000 thousand (UAH 92,150; EUR 12,080 thousand) to finance modernization of its sugar plants. The credit facility is denominated in US dollars, bear an interest rate of Libor+3.5% and matures in 2015. The proceeds were received in July 2008.

• On 14 July 2008, SC "Tsukrovyk Podillia" acquired the integral property complex of the Narkevychi sugar plant for UAH 8,819 thousand (EUR 1,150 thousand). The transaction is not a business combination and represents acquisition of property, plant and equipment in bulk.

• On 17 July 2008, the Group increased its control over the subsidiary company LLC “Dobrobut” (Novo-Sanzharskiy region) by means of acquisition of additional share of 1.90% in the subsidiary’s net assets. The purchase consideration paid amounts to UAH 712 thousand (EUR 93 thousand) and comprises only direct cash payments. The share of ownership in the subsidiary company LLC “Dobrobut” (Novo-Sanzharskiy region) is 99.88% as a result of the transaction.

• On 31 July 2008, the Group received the third tranche from Wells Fargo HSBC Trade Bank amounting to USD 2,159 thousand (EUR 1,385 thousand) with the implicit interest rate of Libor+1.25%.

• On 19 August 2008 the Group established LLC “Agricultural company “Ridny Kray” with the authorised share capital amounting to UAH 10 thousand (EUR 1 thousand).

• On 3 September 2008 LLC "APO "Tsukrovyk Poltavshchyny" was reorganized into OJSC "APO "Tsukrovyk Poltavshchyny".

Board of Directors of ASTARTA Holding N.V. V. Ivanchyk ___(signed)____ P. Rybin ___(signed)____ M.M.L.J. van Campen ___(signed)____ V. Korotkov ___(signed)____ W.T. Bartoszewski ___(signed)____ 17 September 2008, Amsterdam, The Netherlands

ASTARTA HOLDING N.V. · 2020. 5. 18. · customers like Coca-Cola, Obolon and Slavutych (BBH,...

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